August 19, 2022

DealBook: London and Toronto Exchanges Call Off Merger

The Toronto and London Stock Exchanges abandoned their merger plans on Wednesday, one day before shareholders of the Canadian exchange were set to vote on the plan.

The deal, announced in February, had sparked a nationalist backlash in Canada, where the merger was widely seen as a takeover by London.

The exchange companies said in a statement that while proxies showed that a majority of Toronto shareholders were voting in support of the deal, they believed “that the merger is highly unlikely to achieve the required two-thirds majority.”

The exact vote numbers were not available. Thursday’s meeting of shareholders of the TMX Group, operator of the Toronto exchange, was adjourned.

A rival bidder, the Maple Group, a consortium of 13 Canadian banks, funds and pension funds, had been urging shareholders to reject the London deal. The consortium is offering 50 Canadian dollars in cash for every TMX share up to 80 percent of the total shares, or roughly $3.83 billion, slightly higher than the London merger terms, which included a special dividend.

The Maple Group has promoted its rival offer as worth more to shareholders “as well as a better outcome for the Canadian capital markets,” in the words this week of Luc Bertrand, the spokesman for the group.

Politicians and many members of Canada’s financial and legal communities had feared that business now conducted in Toronto would shift to Britain following the takeover. Toronto has long been a major center for mining stocks.

There were also concerns about the proposal in Quebec, where the TMX Group has turned the former Montreal Stock Exchange into a derivatives market.

Shares of TMX rose in Toronto trading on Wednesday. TMX will pay the London exchange a termination fee of 10 million Canadian dollars.

The shortfall in votes for the London-Toronto tie-up came even after Institutional Shareholder Services and Glass Lewis, two proxy advisory firms that are influential among institutional investors, recommended that TMX shareholders approve the deal.

Participating in the Maple Group consortium are Toronto-Dominion Bank, Canadian Imperial Bank of Commerce, National Bank of Canada and Bank of Nova Scotia, and the pension funds Alberta Investment Management, Caisse de Dépôt et Placement du Quebec, the Canada Pension Plan Investment Board, Fonds de Solidarité des Travailleurs du Quebec and the Ontario Teachers’ Pension Plan.

Earlier this week, the chief executives of the London Exchange and the TMX Group, the parent company of the Toronto exchange, offered no indication that they intended to back down during a conference call with reporters.

Article source: http://feeds.nytimes.com/click.phdo?i=753a720ad34467363acdf56692a451cd

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