(Adds comment from conference call, closing share price)
By Lynne Olver
TORONTO, April 30 (Reuters) - TSX Group's (X.TO) shares rose 4.5 percent on Wednesday after the owner of the Toronto Stock Exchange posted a first-quarter profit, before a special charge, that topped analysts' estimates.
Adjusted to exclude a C$15.2 million ($15.1 million) termination payment to International Securities Exchange Holdings Inc ISEa.DE for a canceled Canadian derivatives joint venture, TSX Group said its earnings per share jumped 36 percent.
TSX, which also owns the junior TSX Venture Exchange, will close its acquisition of derivatives market operator Montreal Exchange MXX.TO on Thursday. This all-Canadian merger killed the venture that TSX Group had planned to start in 2009 with ISE.
"Toronto showed solid resilience in the revenue lines and they were better than expected in terms of reducing their operating expense," said Jeff Fenwick, an analyst at Cormark Securities. "Overall, it was a very solid quarter."
TSX Group earned C$32.7 million, or 49 Canadian cents a share, in the three months ended March 31. That was down 10 percent from a profit of C$36.4 million, or 53 Canadian cents a share, in the same 2007 period, due to the ISE termination charge.
Excluding this payment, earnings were 72 Canadian cents a share, well above the 62 Canadian cents expected by analysts, according to Reuters Estimates.
TSX Group shares closed at C$42.30, up C$1.82, but the stock is still down 20 percent so far in 2008.
In the latest quarter, revenue rose 11 percent to C$112.4 million on increased issuer services and market data revenue, while trading revenue fell slightly, the company said. Expenses fell 4 percent to C$45 million, in large part on lower compensation costs.
TSX Group and the Montreal Exchange are combining to create TMX Group, which will trade stocks, bonds, derivatives, energy contracts and eventually carbon emission contracts on various platforms.
Earlier on Wednesday, the pair said that 15.32 million TSX shares and a total of C$428.2 million in cash would be paid to Montreal Exchange shareholders, for a purchase price of about C$1.08 billion.
The derivatives exchange will remain based in Montreal.
Fenwick said he expects the combined company, which has not yet announced a new chief executive, to further cut costs by consolidating information technology platforms and office space.
It will face a strong challenger this autumn, when investment dealers owned by Canada's big banks launch Alpha Trading System, a new stock-trading platform.
On a conference call, TSX interim Co-Chief Executive Rik Parkhill said the strategy to combat Alpha remained the same: having competitive fees, developing better and faster trading technology, and creating new products.
"We think we're going to be very competitive vis-a-vis any new entrant into the market, just as we've been very competitive with the entrants who have already launched," he said.
A chief executive of the merged TMX entity will be named in May, Parkhill said.
Former TSX Group CEO Richard Nesbitt was due to take the top job and Montreal Exchange CEO Luc Bertrand was to become deputy CEO, but Nesbitt left the TSX in February to take over the investment banking unit of Canadian Imperial Bank of Commerce (CM.TO).
$1=$1.01 Canadian Reporting by Lynne Olver; Editing by Peter Galloway