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TMX rejects Maple's C$3.6 bn takeover bid

Toronto: TMX Group (X.TO), operator of the Toronto Stock Exchange, said on Friday its board has rejected a C$3.6 billion (2.3 billion pound) takeover bid from a group of Canadian banks and pension funds.
The TMX in a statement said its board still supports a plan put forth in February to join forces with the London Stock Exchange Group (LSE.L), forming a trans-atlantic powerhouse for trading stocks, derivatives and other financial assets.
The consortium, which calls itself the Maple Group Acquisition Corp, said it was disappointed with TMX's decision and will determine its next course of action in due course.
The group also said it was confident that its proposed transaction could obtain all requisite approvals and close the merger by late fall.
Last week, the all-Canadian consortium proposed to buy TMX and derail the LSE's $3 billion friendly offer, which opponents say would allow Canadian capital markets to fall under foreign control.
The TMX takeover.
battle is part of an intensifying drive by the world's biggest exchange operators to attain the scale now thought to be needed to compete in an increasingly global trading environment. Germany's Deutsche Boerse AG is well on its way to buying the New York and Paris exchanges after U.S. antitrust officials pulled the plug on an $11 billion rival bid for NYSE Euronext.
The rejection is likely to leave Nasdaq (NDAQ.O) -- which had bid for NYSE (NYX.N) along with IntercontinentalExchange Inc (ICE.N) -- scrambling for another target.
The TMX, which also owns the TSX Venture Exchange for small-cap stocks and the Montreal Exchange for derivatives, said its board rejected the Maple Group offer because it was inadequate and too risky.
"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," TMX Chairman Wayne Fox said in a statement.
INADEQUATE OFFER
The...
board believes the price proposed by Maple is inadequate given the deal would entail a change of control of TMX Group, the company said. Maple would pay about C$48 a share in cash and stock for TMX, whose shares closed at C$44.06 on Friday. "It's deja vu all over," said Larry Harris, finance professor at the University of Southern California's Marshall School of Business. Harris was referring to the NYSE's rejection of the unsolicited bid from Nasdaq and ICE.
"Stockholders have to be cautious when management proposes a deal that's potentially self-serving to management," he said, in reference to the TMX rejection.
The TMX argues that under the Maple proposal, TMX and its shareholders bear all of the regulatory risk. The Maple bid contains no compensation for the TMX Group if regulatory approvals are not received, the company said.
REGULATORY HURDLES
The Maple Group advocates combining domestic clearing houses and exchanges to create value, rather...
than international expansion. The members of the Maple consortium include the Canadian Imperial Bank of Commerce (CM.TO), the National Bank of Canada (NA.TO), Bank of Nova Scotia (BNS.TO), Toronto-Dominion Bank (TD.TO) and a group of pension funds.
Maple hopes to combine the TMX with alternative trading system Alpha Group, which is already owned by Canada's big banks, and clearing hub Clearing and Depository Services Inc.
Such a combination would require approval from the country's Competition Bureau. Under that review, Maple would have to prove that efficiencies outweigh competitive concerns.
The LSE-TMX deal faces regulatory hurdles as well. The proposal will require a green light from provincial regulators and the federal government, which will scrutinize the deal under the Investment Canada Act, which requires foreign buyouts of Canadian companies to be of "net benefit" to the country.
The failure of the Nasdaq-ICE bid for NYSE highlights the fragility of deal-making in the exchanges industry....

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