TMX group spurned Maple Group’s $3.6 billion overture and decided to stick with the LSE. Maple Group Acquisition Corporation, a consortium of five of the country’s largest pension funds and four Canadian bank-owned investment dealers, has expressed disappointment over the decision but hasn’t given up the ghost yet.
“We are disappointed the TMX board has decided not to engage in discussions with respect to our clearly superior proposal,” said Luc Bertrand, vice-chairman of National Bank Financial Group, speaking on behalf of Maple investors. “There should be no doubt as to the superiority of our proposal based on the fact, among other things, that since our proposal was announced the TMX Group stock price has traded well above the implied value of the LSE change of control transaction.”
The TMX Group board of directors, however, feels differently about the Maple’s patriotism-tinged all-Canadian proposal. TMX recently issued a statement saying the group “has determined, after consultation with its financial advisors and outside counsel, that for purposes of its merger agreement with London Stock Exchange Group, the Maple proposal does not constitute a superior proposal nor could it reasonably be expected to result in a superior proposal.”
Similar sentiments were echoed by Xavier Rolet, LSE chief executive. Rolet was reported in Financial Times commenting on Maple’s claim that its proposal offers TMX shareholders $48 a share.
“Actually, when you look objectively at the detail of the proposal, it’s not $48, it’s $33 in cash and the rest for existing shareholders hinges on future value creation,” said Rolet. “When you add up all of this, it makes for an underwhelming proposal.”
Reliance on “forward looking information” and lack of details about how the deal would secure the competition regulator’s approval, in particular, proved to be the Achilles’ heel for Maple’s proposal.
“The Maple proposal also does not describe what steps Maple would be willing to take to secure the required regulatory approvals,” said the TMX announcement. “Under the Maple proposal, TMX Group and TMX Group Shareholders bear all of the regulatory risk and the Maple proposal contains no compensation for TMX Group if regulatory approvals are not received.”
Bertrand is quick to point out some of the grounds for rejection are also applicable to the LSE deal.
“We note that the LSE transaction is also subject to a number of material regulatory approvals and other conditions,” he said. “We will determine our next steps in due course.”
Clearly, we haven’t heard the last of the Maple bid. A statement from Maple Group this morning said the group was confident that its proposed transaction “could obtain all necessary shareholder and regulatory approvals by late Fall.”
Meanwhile, TMX and LSE will proceed with their consolidation plan, subject to approval from provincial securities regulators and the federal government.
“The Board supports TMX Group’s proposed merger with LSEG to form a globally competitive yet domestically focused exchange group with strong opportunities for growth,” said Wayne Fox, chair, board of directors, TMX Group. “The Board’s view is that the merger with LSEG continues to be in the best interests of TMX Group and its shareholders and stakeholders.”
As the bidding war for TMX heats up, so does the supply of speculations and rumours some of which suggesting Maple is not beyond a hostile bid in which it will go directly to TMX shareholders to seek their support.