Maple To Make Formal TMX Offer

by Glen Shapiro, LawAndTax-News.com, Washington

02 June 2011

In spite of a firm initial rejection from the TMX Group, the Canadian business consortium Maple has announced that it plans to go ahead with a formal offer of acquisition for the Toronto Stock Exchange operator.

Maple Group Acquisition Corporation is to continue pushing for the acceptance of what it regards as a superior proposal to that currently on the table between TMX and the LSE Group. Maple is to circulate a bid, and initiate the regulatory approval process for its offer. There is, however, no known date earmarked for this publication, with Maple noting that its action will be taken "shortly".

Composed of five pension funds, and four of Canada's leading banks, the membership of Maple is 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..

In initial overtures to TMX, Maple had claimed that its would boost TMX's international competitiveness, be beneficial to shareholders, preserve Canadian governance, decision-making and regulatory oversight of TMX and thus, above all, secure Canadian interests. It was, however, rejected by the TMX Board of Directors, on the grounds that it does not constitute a superior proposal, and could not reasonably be expected to do so in future.

Nonetheless, Maple remains undeterred, and has reiterated that it believes the terms of its deal superior to those offered by LSE. It values the potential transaction at CAD3.6bn, with each TMX share to be exchanged for CAD33.52 in cash, plus 0.3016 of a share of Maple. The maximum aggregate amount of cash payable would be CAD2.5bn, and the maximum number of Maple shares issuable 22.5bn. Maple continues to stress, as it has since the first approach to TMX was made, that its plan represents a 24% premium to the implied value of the LSE deal, and a 20% premium to the volume weighted average price of TMX Group shares in the 20 days prior to the offer's announcement.

It is this commitment to the proposals first made on May 12 which has caused further problems for Maple. According to TMX's response to this latest announcement, because there have been no changes, TMX is prohibited by its current merger agreement from any discussions with Maple or its advisors.

Speaking on behalf of the Maple investors, Luc Bertrand, Vice Chairman of National Bank Financial, said, “We are disappointed that the TMX Board declined our repeated invitations to engage us in discussions. Had they done so, we are confident that we could have addressed any questions or concerns they might have regarding our superior proposal. By choosing not to do so, and now by accelerating the timing of their meeting to consider the LSE take-over, they have given us no choice but to make our offer available directly to TMX Group shareholders. If at some later date the Board wishes to engage with us, we will be pleased to have that discussion.”

Bertrand added, “We believe our offer provides superior value for TMX Group shareholders, and provides a superior outcome for all participants in the Canadian capital markets. We are confident our bid will be successful, and that we can obtain all necessary shareholder and regulatory approvals and close the transaction by late fall.”

TMX's Board of Directors has, however, pledged to consider a formal offer, if and when it is made.

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