June 7, 2012 / 11:10 PM / in 5 years

TMX eyes global expansion if Maple deal passes

NEW YORK (Reuters) - TMX Group (X.TO) will be “uniquely positioned” to expand globally through acquisitions if regulators allow the Toronto Stock Exchange operator to be bought by a consortium of Canadian financial institutions with deep pockets, the company’s chief executive said on Thursday.

TMX is awaiting the approval from Canadian regulators for its proposed C$3.8 billion ($3.71 billion) takeover by the Maple Group consortium of 13 Canadian banks, insurers and pension fund administrators.

“Between the banks and pension funds, who have capital, who from my engagement with them are interested in the international expansion that I want to bring to the institution, we are going to be uniquely positioned to be an acquirer of other exchanges around the world,” TMX CEO Thomas Kloet said in an interview.

He said he is “hopeful” that the Maple deal will be approved by the July 31 deadline, but he would not object to an extension if necessary.

Kloet thinks big, global exchange deals are necessary as companies look to build out their technology infrastructures, despite a number of mega-deals failing in recent years.

“People are going to continue to scrutinize the value of them, but I don’t think they are dead,” he said of large cross-border deals.

The exchange industry saw a frenzy of merger attempts in the past year, four of which fell through. Regulators blocked deals between Deutsche Boerse (DB1Gn.DE) and NYSE Euronext NYX.N, Nasdaq OMX (NDAQ.O), and IntercontinentalExchange (ICE.N) and NYSE.

Singapore Exchange Ltd’s (SGXL.SI) bid for Australia’s ASX Ltd (ASX.AX) was blocked by the Australian government, while London Stock Exchange’s (LSE.L) bid for TMX was halted by TMX shareholders, who leaned more toward the Maple transaction.

Kloet, a former CEO of Singapore Exchange, said TMX would look to the United States, Europe, Asia and South America for deals, and that size was not an issue as long as there were synergies and the deal was accretive to shareholders.

“The opportunity is there to be a global player,” Kloet said.

ALPHA

Maple wants to combine TMX with bank-owned Alpha Group, Canada’s second-biggest stock trading venue.

Critics of the Maple deal have said it could concentrate too much power in the hands of a single player, creating a near monopoly for Canadian stock trading and clearing operations.

Kloet thinks concerns around pricing have been addressed in talks with regulators.

He added that he has not sat down with executives from Alpha to discuss how the exchanges would merge.

“If I start engaging too much with Alpha right now, I could end up damaging our chances for approval,” he said.

“We know they use an external technology provider and we don’t know if that technology is where it should be for the market place, so there are a whole host of questions we have to engage in with Alpha to determine what we would do with it.”

Domestically, Kloet said he would be interested in expanding TMX’s reach in the commodity markets, including energy and metals, and that TMX could do so without an acquisition.

“Derivatives on those would be interesting,” he said.

He added that the exchange is also interested in developing its index products further as well.

TMX also owns the TSX Venture Exchange for small-capitalization stocks and the Montreal Exchange for derivatives.

Editing by Andre Grenon

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