saving royal doom at the expense of Canadian boom (TMX-LSE merger)


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TMX Group Inc. (X-T44.060.010.02%) 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, which call themselves Maple Group, will have to consider a proposal with more information in hopes of engaging the TMX in discussions toward a friendly deal. The other option is a hostile bid, going directly to TMX shareholders to seek their support.
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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, theres not enough information to justify the $48 claim, and not enough detail on how Maple would ensure it gets the competition regulators clearance to do the deal, said Tom Kloet, the chief executive officer of TMX.
Theres 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 hasnt said what it believes Alpha and CDS are worth.
Maple Group made its proposal conditional 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 market for stock trading.
We havent seen a description of what [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.