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Maple Group to extend offer for TMX

TMX
Tags: TMX Group

Maple Group Acquisition Corp. is extending its $3.8 billion takeover offer for TMX Group Inc. (X-T) to the end of July.

The consortium of 13 Canadian banks, pension funds, brokerages and insurers conceded last week that the bid for the owner of the Toronto Stock Exchange was unlikely to receive regulatory approval before Monday's deadline.

Maple needs regulatory approvals to merge TMX with the alternative Alpha and CDS, which are owned by the major players in the Canadian securities industry, several of which are part of the consortium.

Maple announced Monday it has reached agreements for the acquisition of Alpha and the Canadian Depository for Securities Ltd.

The Competition Bureau remains the big hurdle for the takeover deal.

And the federal watchdog has signalled it would need to see "a significant and material change to the competitive consequences" of the proposed deal to address its serious concerns.

An update on the status of the Bureau's review prompted both Maple and TMX Group to provide an update last Friday on the situation.

Maple said the Bureau told the groups that changes proposed by the Ontario Securities Commission, which have not yet been made public, could alter the deal to diminish the federal watchdog's concerns.

The OSC has held extensive hearings into the deal's impact on competition in Canada's market sector, including smaller players' concerns that the deal would concentrate 90 percent of Canadian trading activity at TMX and that it could charge unfair prices as a result.

Any potential closing of the deal could still be months away, which would mean the bid will see its one-year anniversary on May 15.

The draft recognition order from the OSC is subject to a 30-day public comment period and other provincial regulators have indicated they would undergo a similar process. The Competition Bureau has indicated it will not make a final decision until it has time to consider both the published draft order and any final orders, Maple has said.

Regulators in Quebec, B.C. and Alberta have also signalled their intention to publish public notices on the deal, it added.

Quebec's Autorité des marchés financiers said last month it intends to approve the transaction. But it will also publish a 30-day comment period regarding Maple's proposed acquisition of CDS.

The proposed Maple deal offers to buy 70 percent of TMX for $48 per share, plus a process that will see current TMX shareholders receive a 40 percent stake in the new company in exchange for their remaining shares.

Maple investors would end up holding the remaining 60 percent.

Maple continues to commit not to allow any person or company to acquire more than 10 percent of its voting shares without prior approval of the regulator.

TMX Group's board originally supported a merger proposal with the London Stock Exchange Group PLC and dismissed the Maple Group offer over a number of debt, competition and regulatory concerns.

But after the LSE deal failed to gain enough shareholder support in the face of the richer Maple bid last June, the board turned its attention to the Maple offer.

Maple includes many of the country's largest financial institutions. Its members are the Alberta Investment Management Corporation, the Caisse de dépôt et placement du Québec, Canada Pension Plan Investment Board, CIBC World Markets Inc., Desjardins Financial Group, Dundee Capital Markets Inc., Fonds de solidarité des travailleurs du Québec, GMP Capital Inc., National Bank Financial Inc., Ontario Teachers' Pension Plan, Scotia Capital Inc., TD Securities Inc. and Manulife Financial.

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