Battle for TMX Group nears conclusion

Maple Group -- a consortium of the country's major banks, insurance companies and pension funds -- announced this week that it will accept conditions set by securities regulators for its $3.8-billion bid for the TMX Group (X-T).

The head of Maple Group says that agreement between regulators and the company is paving the way for a new regulatory environment for Canadian capital markets.

"At the end of the day not only will the Maple Group will benefit from this but the Canadian capital markets will also be the great beneficiaries of a new or enhanced regulatory model for the exchange space," Luc Bertrand, Maple Group spokesman and vice-chairman of National Bank Financial, tells BNN. "I believe it was a good exercise because people will look back a couple of years from now, say what happened here is that we revisited a regulatory framework, brought it up to the standards we see today and in keeping with today's business realities."

On Thursday both the Ontario Securities Commission and the Quebec equivalent, Autorité des marchés financiers, tabled conditions for the bid, which included controls on governance and the company's board of directors, restrictions on fees that it can charge and limits on ownership.

"The Commission has thoroughly reviewed the regulatory issues raised by Maple's proposal and developed measures necessary to ensure that the public interest is protected," OSC chair Howard Wetston said in a statement. "Public consultation has been a fundamental part of our review process and we will carefully consider the further input we receive on these orders when making our final determination."

The deal still needs formal approval from the Competition Bureau as well as from the securities commissions in the provinces of British Columbia and Alberta, which are set to publish notices soon.

This week's announcement may mark the end of the battle for TMX Group, the operator of the country's largest stock exchange, which kicked off last year after the London Stock Exchange announced a takeover for the company.

Canadian business leaders -- fearing what would happen if the operator fell into the foreign ownership -- got together and created the Maple Group, which eventually beat out LSE with a hostile bid.

DID MAPLE GROUP GIVE TOO MUCH?

As part of the deal, Maple will wrap the bank-owned Alpha Group trading platform into the TMX, giving it control of around 85 percent of all trading in Canada. It will also acquire CDS, the country's clearinghouse for trades, which currently operates as a not-for-profit enterprise.

Much of the criticism against the Maple Group bid surrounded CDS and whether the company intended to increase the fees for clearing stocks. But, as part of the conditions from regulators it will continue to pay rebates back to users of the system and will have to apply to the OSC for future fee increases.

Bertrand says those restrictions -- which some say would hurt the economics of the deal -- are not too onerous.

"We wouldn't be talking to you today if the business model was not sustainable given the regulatory requirements," he says. "We will be able to provide, through the integrated model, new services that currently aren't possible to offer because there is no integration."

With files from Reuters