TMX deal to run gauntlet of public scrutiny

Thu Nov 17, 2011 3:00pm EST
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By Jennifer Kwan and Pav Jordan

TORONTO (Reuters) - A consortium that wants to buy Canada's largest stock market operator will embark next week on its public campaign to persuade regulators the C$3.8 billion ($3.7 billion) deal is good for the country's capital markets.

In a series of hearings, Maple Group's plan to buy TMX Group (X.TO: Quote), owner of the Toronto Stock Exchange, will come under the scrutiny of the powerful securities commissions of Quebec and Ontario as well as two other provincial watchdogs.

The deal will also require the blessing of the federal Competition Bureau, which may have deep reservations about a plan that would put all of Canada's largest exchanges back under the wing of the country's big bank-owned dealers.

If TMX's stock price is an accurate barometer, approval of Maple Group's C$50-a-share offer for TMX is far from assured.

The shares were trading at C$44.80 on Thursday, a 10 percent discount to the bid. Investors say regulators will, at the very least, insist on some changes to the current Maple Group proposal, which critics say would create an unfair monopoly.

"If the Competition Bureau really does a great job, they're going to believe there are various possible conflicts of interest in this deal, and they're going to demand remedies to make sure those conflicts of interest are controlled," said Chris Damas, a TMX shareholder and president of BCMI Research.

The plan is to put TMX under the control of the 13 big-league banks, pension funds and other financial institutions that make up the Maple Group.

More than a decade ago the TMX's predecessor became a for-profit company through a process known as demutualization.   Continued...