Canada's TMX in talks to buy Direct Edge: sources

Wed Jul 11, 2012 6:25pm EDT
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By John McCrank, Paritosh Bansal and Jennifer Kwan

NEW YORK/TORONTO (Reuters) - TMX Group Inc, the operator of the Toronto Stock Exchange, is in talks to buy U.S. stock market operator Direct Edge Holdings LLC, sources familiar with the matter said on Wednesday.

The deal hinges on TMX closing its own deal to be acquired by Maple Group, a consortium of Canadian banks, pension funds and financial firms, one source said.

Maple received final regulatory approval for its C$3.8 billion ($3.72 billion) acquisition of TMX late on Wednesday. TMX urged its stakeholders to tender their shares to the deal.

Direct Edge has been looking for a buyer for months, the sources said. One source said the exchange operator was initially looking to sell for around $800 million, but now the price is likely to be around $500 million. Another source, however, said that the price could be around $300 million.

A spokesman for Direct Edge, the No. 4 U.S. stock exchange by volume, declined to comment on the news, which was earlier reported by the Wall Street Journal. A spokeswoman for TMX also declined to comment.

The talks follow a series of failed merger attempts over the last couple of years in the exchanges industry. A sale would allow Direct Edge's owners to profitably cash out and give TMX a toe-hold in the U.S. market.

Direct Edge is owned by a consortium that includes the International Securities Exchange, Knight Capital Group, Citadel Derivatives Group, Goldman Sachs Group, and J.P. Morgan.

TMX Chief Executive Thomas Kloet said in an interview with Reuters last month that once the TMX-Maple deal is complete, TMX will be "uniquely positioned" to expand globally through acquisitions.   Continued...