LSE bid on knife edge as TMX battle heats up

Thu Jun 23, 2011 6:28pm EDT
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By John McCrank and Luke Jeffs

TORONTO/LONDON (Reuters) - A brace of sweetened offers has failed to sway shareholders in the race to buy the operator of Canada's biggest stock exchange, and time is running out ahead of a June 30 shareholder vote.

Shareholders said the London Stock Exchange must raise its friendly bid for TMX Group significantly before they will back the proposal, which now includes a welcome cash element in the shape of a special dividend.

But antitrust concerns could derail the second offer, a now-sweetened proposal from a consortium of Canadian banks, pension funds and financial services firms.

"From a game perspective or a strategy perspective, they're now basically where they were before," said Alison Crosthwait, director of global trading strategy at Instinet, which runs Canada's second biggest alternative trading system.

She added: "What surprises me is that, increasingly, I'm hearing a little bit of 'Perhaps, neither of the bids will happen...' So there's still risk in this."

With only a week before the vote, shareholders who talked to Reuters mainly favor Maple's home-grown bid, but the outcome is far from certain, particularly on the regulatory front. Some shareholders also say the LSE has not done enough to seal the deal.

The battle for TMX Group is part of a global wave of consolidation by exchanges seeking to expand geographically and in terms of the products they offer.

LSE Chief Executive Xavier Rolet wants to beef up the London exchange to fight off rivals, nimble new market entrants and predators. He says LSE's "merger of equals" with TMX will create a transatlantic powerhouse in mining and energy equities.   Continued...

<p>Xavier Rolet, the chief executive of the London Stock Exchange, speaks about an upcoming merger with Canadian exchange TMX Group Inc. during the Sandler O'Neill global exchange and brokerage conference in New York June 10, 2011. REUTERS/Lucas Jackson</p>