TMX profit hit by takeover costs, market uncertainty

Fri Jul 27, 2012 10:53am EDT
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By Jennifer Kwan

TORONTO (Reuters) - TMX Group Inc (X.TO: Quote), operator of the Toronto Stock Exchange, reported a drop in quarterly profit on Friday, hit by a substantial charge related to an imminent C$3.8 billion ($3.76 billion) takeover by the Maple Group consortium of Canadian financial institutions.

Maple, a consortium of 12 big banks, pension funds and insurers, recently won approvals from provincial regulators and the federal Competition Bureau to buy TMX. Maple will put TMX and TMX's biggest domestic rival, Alpha Group, under the same umbrella along with clearing house Canadian Depository for Securities Ltd.

A C$54.4 million charge for the Maple deal pulled down TMX net income in the second quarter to C$1.8 million, or 2 Canadian cents a share. That compares with income of C$54.7 million, or 73 Canadian cents, a year earlier.

The charge included a C$29 million break fee due to the London Stock Exchange -- with which TMX had agreed on a takeover deal before Maple intervened -- and C$23.4 million in legal, advisory and other costs.

"Put simply these are the costs associated with successfully reaching the finish line with Maple, which we expect to do on July 31," TMX Chief Executive Tom Kloet told a conference call with analysts.

"The Maple transaction delivers value to shareholders, while positioning TMX Group for future growth."

Excluding Maple-related charges and other one-time items, earnings dropped to 81 Canadian cents a share from 94 Canadian cents, excluding special items, in the year-before quarter.

Revenue fell 1 percent to C$167.5 million, reflecting lower revenue from new listings, financings and equity trading due to a rocky global economic recovery, the company said.   Continued...