November 8, 2011 / 11:15 AM / in 6 years

UPDATE 3-TMX leaves investors wanting even as profit jumps

* Q3 EPS C$0.90 vs analysts average estimate C$0.87

* Revenue up 15 pct, boosted by derivatives trading

* TMX says notches record listings as of Sept. 30 (Adds details from analyst call, comment)

By Jennifer Kwan

TORONTO, Nov 8 (Reuters) - The company that operates the Toronto Stock Exchange said on Tuesday quarterly profit rose more than expected, but it shed little light on whether its proposed C$3.8 billion takeover was moving closer to approval.

TMX Group, whose properties include the TSX Venture Exchange for small-cap stocks and the Montreal Exchange for derivatives, reported a 21 percent jump in third-quarter profit. Revenue rose 15 percent, boosted by derivatives trading and clearing, as well as issuer services.

The results were announced less than two weeks after TMX said it would drop its neutral stance on a takeover offer by a consortium of Canadian financial institutions that’s contingent on a series of regulatory approvals.

“We’ve been looking for any sign that the recent board and management support of the Maple transaction could be because they view that approval is forthcoming,” Ed Ditmire, an analyst at Macquarie Capital Inc in New York, said after a TMX conference call on Tuesday.

“That’s probably what people are looking for: signs that management is incrementally confident that this deal can be completed,” he said. “We haven’t gotten that.”

RESULTS SHRUGGED OFF

Net income in the third quarter rose to C$67 million ($66 million), or 90 Canadian cents a share, from C$55.2 million, or 74 Canadian cents, a year earlier. On an adjusted basis, TMX earned 92 Canadian cents a share.

Analysts, on average, had expected earnings of 87 Canadian cents, according to Thomson Reuters I/B/E/S.

Revenue rose to C$167.8 million, slightly higher than the average estimate of C$165.2 million.

Compensation and benefits expenses rose during the quarter and TMX incurred C$2.4 million in pretax merger-related costs.

Operating expenses rose to C$72.3 million, from $68.2 million, reflecting the inclusion of expenses related to TMX Atrium, a data connectivity provider acquired earlier this year.

Shares of TMX rose 4 Canadian cents, or 0.1 percent, to C$44.39 on the Toronto Stock Exchange, inching closer to Maple’s C$50 offer price.

But investors largely shrugged off the quarterly report with approval of the proposed takeover by the 13-member Maple Group Acquisition Corporation still pending.

The board’s support bolstered the chances that shareholders will endorse the deal. It would put Canada’s largest exchange under the same umbrella as its biggest rival, Alpha ATS, an alternative stock trading venue that has steadily chipped away at TMX’s market share.

That has raised concerns that Canada’s federal Competition Bureau might object to the combination. Provincial authorities will also have to sign off on the deal.

In a conference call after Tuesday’s results, Chief Executive Tom Kloet said he doesn’t foresee anything derailing the process. “We are in this deal with both feet,” he said.

But he revealed nothing specific about any progress on talks with competition authorities on the fate of the transaction. TMX has said that it is working with regulators to facilitate the approval process.

As a measure of the strength of its business, TMX said on Monday that the TSX and the TSX Venture added 318 listings this year as of Sept. 30, more than any other exchange group in the world.

$1=$1.01 Canadian Additional reporting by Aftab Ahmed in Bangalore; editing by Frank McGurty

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