Canada banks TMX bid tops LSE, but doubts remain

Sun May 15, 2011 6:50pm EDT
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By Pav Jordan

TORONTO (Reuters) - A group of Canadian banks and pension funds are hoping their C$3.6 billion offer for TMX Group will keep the nation's largest stock market from falling into foreign hands, but questions remained on Sunday whether that is reason enough to succeed.

The C$48 per share offer for TMX from a consortium calling itself the Maple Group Acquisition Corp topped a $3 billion friendly bid for the exchange operator from the London Stock Exchange.

Maple Group includes banks that have opposed the LSE deal, arguing it would put control of TMX into foreign hands and threaten Toronto's growing status as a world financial center.

But experts said the Maple Group's bid appeared to have the sole purpose of blocking the LSE deal from going through and questions remained about the rationale of such a move.

"The onus is on them to show us why they are doing this," said Alison Crosthwait, director of global trading strategy at Instinet. "They are going to have to make a case for doing this other than just blocking the LSE bid."

The offer puts the LSE in a tight spot, forcing it to fend off the rival bid as it seeks to rejuvenate its centuries-old business.

If LSE boss Xavier Rolet were to better his terms, it would undermine claims the LSE and TMX are equal merger partners in their deal, something Rolet has stressed in the past to soothe nationalist nerves in Canada.

Ontario-based TMX has said its board is analyzing the Maple proposal but it is continuing to pursue the regulatory permits required for the LSE deal. Besides the Toronto Stock Exchange, TMX also owns TSX Venture Exchange for small-cap stocks and the Montreal Exchange for derivatives trading.   Continued...

<p>London Stock Exchange CEO Xavier Rolet (L) and TMX Group CEO Tom Kloet speak to the media in an overall view of the TMX Broadcast centre regarding the merger of the TSX and the LSE in Toronto, February 9, 2011. REUTERS/Mark Blinch</p>