Alpha's price still a thorny issue in TMX deal

Fri Dec 9, 2011 3:53pm EST
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By Pav Jordan and Jennifer Kwan

TORONTO (Reuters) - A Canadian financial consortium is still negotiating terms of a side deal it considers crucial to its plan to take over TMX Group and bring most of the country's major exchanges under a single roof, months after the proposal came to light.

In agreeing to pay C$3.8 billion ($3.72 billion) for TMX, the operator of the Toronto Stock Exchange, Maple Group stipulated that it would also take over Alpha Group, the TMX's main domestic competitor. The sweeping proposal would give the enlarged group 80 percent of all Canadian equity trades.

But the two sides are still far apart on price, the Globe and Mail newspaper reported on Friday, citing people familiar with the situation.

Investors generally agreed the issue was not a deal-breaker but some say it could complicate the overall proposal.

"The challenge is how do you value Alpha?," said Thomas Caldwell, chairman of Caldwell Financial Ltd and a TMX shareholder. "Clearly they're going to have to get an independent valuation."

Any negotiations over Alpha are bound to be tricky. Not only are many of the 13 Maple members among the biggest customers of TMX and Alpha, they are also among the institutional investors that founded Alpha in 2007 as an alternative trading venue.

According to the Globe, the two sides are still far apart. Maple is offering about C$100-C$200 million for the exchange, while Alpha is looking for about C$450-C$600 million, the paper said.

Alpha Chief Executive Jos Schmitt would neither confirm or deny elements of the report, but he said negotiations over Alpha's valuation were ongoing.   Continued...