May 27, 2024

DealBook: Canadian Banks Make Rival Bid for Toronto Exchange

The competition for exchanges continues to heat up.

On Saturday, the Maple Group Acquisition Corporation, formed by a consortium of four Canadian banks and five pension funds, made an unsolicited and informal offer of 3.6 billion Canadian dollars ($3.7 billion) in cash and shares for TMX Group, the parent company of the Toronto Stock Exchange. The bid surpassed an earlier one from the London Stock Exchange Group about 20 percent.

The same day, the L.S.E., said in a statement that it “remains committed” to its offer in the face of a higher proposal from a group of Canadian financial institutions. But it did not alter its terms.

The bid by the Maple Group is the latest unsolicited deal in the industry. Earlier this year, NYSE Euronext announced a $10.3 billion tie-up with Deutsche Börse. Shortly thereafter, the Nasdaq OMX Group and the IntercontinentalExchange put forth a $11 billion takeover offer for the owner of the Big Board, but they withdrew the offer on Monday.

The industry activity has also sparked a sense of nationalistic pride. Last month, the Australian government blocked the Singapore Exchange’s acquisition of the Sydney bourse.

The TMX Group acknowledged the higher offer on Saturday, saying it “is not binding and was prepared for discussion purposes.”

It also noted that the Maple Group bid was contingent upon “a number of significant conditions,” including regulatory approval for the combination of TMX Group with both Alpha Group, a rival Canadian trading platform, and CDS, the nation’s stock clearing facility.

The bank and pension consortium is bidding 48 Canadian dollars a TMX share for the Toronto Stock Exchange. The L.S.E. bid, which varies in size as share prices fluctuate, valued TMX at about 39 Canadian dollars a share on Friday.

L.S.E. shares rose 12 pence, or 1.45 percent, to 839.50 pence in morning trading in London on Monday.

The four banks participating in the new bid are Toronto-Dominion Bank, Canadian Imperial Bank of Commerce, National Bank of Canada and Bank of Nova Scotia. They are joined by some of the nation’s largest pension funds: Alberta Investment Management, the Caisse de dépôt et placement du Quebec, the Canada Pension Plan Investment Board, the Fonds de solidarité des travailleurs du Quebec and the Ontario Teachers’ Pension Plan.

“We believe there is an opportunity to create significant value by capitalizing on TMX’s strengths to build a stronger integrated exchange and clearing group — and by doing so, to secure the future growth and ongoing integrity of the Canadian capital markets,” said Luc Bertrand, vice-chairman of National Bank Financial Group. “We believe our offer constitutes a superior proposal under which shareholders would receive cash, plus the opportunity to continue to participate in the company’s ongoing growth.”

Several of the banks have been vocal in their opposition to the merger with L.S.E. before the weekend offer. In a March letter, they denounced the merger as a “deal that wraps itself in the flag of globalization.” They said it would lead to the neglect of smaller Canadian businesses, while threatening TMX’s role as the world’s leading resource exchange.

On Friday, TMX shares closed up 75 cents, or 1.83 percent, at 41.75 dollars.

Separately on Friday, the TMX Group announced that it had applied to securities regulators in the provinces of Ontario, Quebec, Alberta and British Columbia for approval of its merger with L.S.E.

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