TMX takeover will lift Canada's capital markets: Maple

Luc Bertrand, the spearhead for the takeover of the TMX Group by the Maple Exchange, says the deal spells good things for the Canada’s capital markets.

“This will take this country’s capital markets to new heights especially in international forums,” he tells BNN. “Since 2008 there have been major changes in the capital markets…the idea of having an integrated exchange where you do the trading and clearing in the same organization will open up new opportunities and new ways of managing our affairs here in Canada.”

Bertrand, delighted that the year-long battle for the exchange operator is almost over, also says the changes asked by regulators in order for the deal to close are palatable for Maple Group -- a consortium made up of the country’s leading banks, insurers and pension plans.

“The big picture here, the basis of the transaction does not change -- the philosophy does not change and for shareholders and for stakeholders that's the important development, ” he says. “There are a few changes on the governance and regulatory side of how the business will be managed…none of that in my view challenges the underlying premise and philosophy of the proposal.”

On Wednesday the Maple Group cleared a vital set of regulatory hurdles in its proposed takeover of the TMX Group.

The Ontario Securities Commission (OSC) released final recognition orders for the takeover, while the federal Competition Bureau quickly followed suit, saying it has no plan to challenge the takeover on “competitive concerns.”

The recognition orders provide the terms under which the OSC will allow the Maple Group to operate both the exchanges and the clearing group.

Maple Group earlier announced the recognition orders were pending and said it is losing a member, with GMP Capital withdrawing from the consortium, as its deputy chairman is named to Maple’s board. GMP withdrawing from the consortium satisfies regulatory requirements that Maple's board cannot include more than 50 percent representation from the original Maple consortium.

GMP had a stake of less than 1 percent in Maple.

Quebec regulators, the Autorité des marchés financiers (AMF), had previously released final recognition orders about the takeover of TMX Group. Maple Group said today that the AMF plans to soon release a final recognition order regarding the acquisition of CDS, which clears all stock trades in Canada.

The orders released on Wednesday by the OSC have tightened the rules for CDS, which was the focus of much criticism of the takeover.

“Specifically, the provision is now more explicit that the rules and any arrangements between CDS and its participants not prohibit, limit or impede the ability of participants to choose which entity it wishes to engage to perform the posttrade clearing, settlement or depository services. As well, the rules and arrangement cannot prohibit, limit or impede any third party service provider in the provision of its services," the OSC said.

The takeover is still under review by the British Columbia Securities Commission and the Alberta Securities Commission.

"I don't see how any of these could outstrip the gravitas of the OSC and the Competition Bureau," said Chris Damas, an independent analyst at BCMI Research. "They may play for a few things, but this is a done deal."

The Competition Bureau, which had raised competitive concerns about the takeover in the past, said it had been in contact with the OSC while it was preparing its recognition orders.

“In that context, Competition Bureau staff advised that it is possible that measures contained in the draft recognition orders, if finalized and enforced, may materially change the regulatory environment such that the Bureau's serious concerns may be substantially mitigated,” Maple Group said in its statement today.

The watchdog said on Wednesday that the recognition orders did enough to satisfy its concerns that the takeover would not create an uncompetitive environment.

“While the Bureau conducted its own review of the proposed transactions, the measures contained in the OSC's final recognition orders materially change the regulatory environment sufficient to substantially mitigate the Bureau's competition concerns. Accordingly, the Bureau is today issuing a No Action Letter (NAL) to Maple Group in respect to the proposed transactions,” Melanie Aitken, Commissioner of Competition, said in a statement.

As part of the takeover, Maple Group -- made up of the country’s largest banks, insurers and pension plans -- would acquire the TMX Group, the alternative trading platform Alpha Group and the Canadian Depository for Securities.

Critics of the deal say the takeover will concentrate control of Canada’s equity markets in the hands of the country’s major financial institutions.

TMX agreed to back Maple's bid last October, after initially rejecting an unsolicited offer that the banks and their partners put together to scupper an offer for TMX from the London Stock Exchange.

Maple touted its proposal as the best way to keep the country's exchanges out of foreign hands as a wave of foreign firms launched bids for global rivals in the exchanges sector.

With files from Reuters