Skip to main content
new

TMX Group CEO Tom KloetMARK BLINCH

TMX Group Inc. is sticking with its plan to merge with London Stock Exchange Group PLC, rejecting a $3.6-billion counter-proposal from a group of nine Canadian banks and pension funds as too risky and vague.

The rejection means the banks and funds, who call themselves Maple Group, will have to consider a proposal with more information in hopes of engaging TMX in discussions toward a friendly deal. The other option is a hostile bid, going directly to TMX shareholders to seek their support.

Maple says its offer is worth $48 a share in cash and stock, a premium to the roughly $40 a share that the LSE plan is valued at. However, there's not enough information to justify the $48 claim, and not enough detail on how Maple would ensure it gets the competition regulator's clearance to do the deal, said Tom Kloet, chief executive officer of TMX.

"There's just not enough information in the proposal, in particular around strategy and the business model," he said in an interview.

The Maple proposal contains $33.52 of cash, with the rest in shares. Maple argues it will create value by combining TMX with the bank-owned Alpha trading system and the CDS Inc. clearinghouse. Maple hasn't said what it believes Alpha and CDS are worth.

Maple Group made its proposal conditional upon approval from regulators to combine Alpha and CDS with TMX. However, there may be complications there, because, for example, Alpha and TMX together would have almost 90 per cent of the Canadian stock trading market.

"We haven't seen a description of what they [Maple]would do" to meet regulators' concerns, Mr. Kloet said.

TMX and LSE will continue with their plan to merge, which requires approval from provincial securities regulators and the federal government, he said.

"We are disappointed the TMX board has decided not to engage in discussions with respect to our clearly superior proposal," said Luc Bertrand, vice-chairman of National Bank Financial, speaking on behalf of the Maple Group late Friday. "There should be no doubt as to the superiority of our proposal based on the fact, among other things, that since our proposal was announced the TMX Group stock price has traded well above the implied value of the LSE change of control transaction.

"We note that the LSE transaction is also subject to a number of material regulatory approvals and other conditions. We will determine our next steps in due course."

Interact with The Globe