Maple Commences Formal TMX Offer
Thursday, June 16, 2011

In spite of past rejection, the Maple consortium has commenced a takeover bid for TMX Group, the Canadian stock exchange operator, with an offer worth an estimated CAD3.7bn (USD3.8bn).

Maple made the announcement on June 13, detailing the nature of the proposed deal. The offer forms the first part of an integrated acquisition transaction, and indicates that 70% of the outstanding TMX Group shares would be purchased at a value of CAD48 in cash per share. The second step would be a court-approved scheme of arrangement providing shareholders with 40% of Maple shares in exchange for the remaining TMX shares. Under the plans, pension fund and other investors would own 38% of Maple, with bank-owned investment dealers taking 22%. No shareholder would own more than 10% of Maple's total shares outstanding.

Speaking on behalf of Maple, Luc Bertrand Vice Chairman of National Bank Financial, said: “Our offer provides superior value and greater certainty for TMX Group shareholders, and a superior outcome for all participants in the Canadian capital markets. We are confident our offer will be successful, and that we can obtain all necessary shareholder and regulatory approvals and close the transaction by late fall.”

Maple Group Acquisition Corporation was formed by a group of five pension funds, and four of Canada's leading banks in reaction to TMX's existing merger deal with the London Stock Exchange Group (LSEG). The membership was as follows: Alberta Investment Management Corporation; Caisse de dépôt et placement du Québec; Canada Pension Plan Investment Board; CIBC World Markets Inc.; Fonds de solidarité des travailleurs du Québec; National Bank Financial Inc.; Ontario Teachers' Pension Plan Board; Scotia Capital Inc., and TD Securities Inc.

Shortly before the offer commencement announcement was made, Maple added Desjardins Financial Group, Dundee Capital Markets, GMP Capital Inc. and Manulife Financial to its list of investors. This move, according to Bertrand, "is another clear indication that our offer for TMX Group is superior to the LSE takeover plan, and that our vision for an integrated exchange provides a better way forward for Canada’s capital markets.”

It is on this issue of superiority that the success of the Maple bid hinges. Earlier approaches were rejected by TMX on the grounds that the Maple offer did not constitute a superior proposal nor could it reasonably be considered to do so in future. TMX shareholders are due to vote on the LSEG merger on June 30, and Maple has now explicitly urged these shareholders to vote against it. Bertrand stressed that the Maple deal could only go ahead if the LSEG transaction did not, and that such action against the bid ought now be taken to preserve the opportunity to approve Maple's proposals.

Bertrand added that many TMX shareholders had expressed unhappiness at TMX's refusal to engage with Maple over its offer, and that the timing of the vote was cause for concern, given outstanding regulatory issues.

As a further incentive, Bertrand went on to announce the makeup of a portion of a potential Maple/TMX Board of Directors. 50% would be independent, 25% residents of Québec, and 25% with expertise in, or association with Canadian public venture markets. The names of seven investors willing to serve on the Board were given, and they include Bertrand himself, along with the CEO of Alpha Corp, with which Maple and TMX would also be merged. Betrand argued that the Board would thus be made up of those with deep industry knowledge, expertise and integrity.

In response to Maple's advance, TMX again stressed its unsolicited nature, but pledged its Board would fulfil its fiduciary obligation in reviewing the offer. In contrast to past rebuttals, TMX will also reassess whether the deal represents, or could represent, a superior deal. It will, nonetheless, continue to pursue the requirements necessary for the LSEG transaction to go through.