Regulators Mull TMX-Maple

Terry Flanagan

While regulators continue to pore over the TMX-Maple deal, some market participants believe that the proceedings are a formality and that approval is imminent.

“The regulators will take a good, long, hard look at the deal and there may need to be concessions, symbolic in nature, but I don’t think Quebec or any other province will block the deal,” Brendan Caldwell, president, director and chief executive of Caldwell Investment Management, told Markets Media. “It’s better for the status quo than having the disruption of a foreign takeover, and better for the capital markets for an internal takeover rather than fighting amongst themselves.”

TMX Group, the operator of the Toronto Stock Exchange, announced earlier in the month that it had entered into a support agreement with proposed suitor Maple Group regarding a deal for all of TMX’s outstanding shares, in a transaction valued at $3.8 billion. Under the deal, Maple has agreed to pay TMX a reverse termination fee of $39 million if the transaction fails due to regulatory concerns. Regulatory hearings were held in Montreal last week and are set for Toronto this week.

Last week, Maple Group spokesman Luc Bertrand told Montreal regulators that the deal would “open the way to a new era of growth” for Canadian capital markets and would benefit all market participants.

If all the requisite approvals are granted, then the parties hope to close on the deal by early 2012. As part of the support agreement, Maple has extended its offer until Jan. 31, with the possibility of a further three-month extension possible if necessary to obtain the necessary regulatory approvals.

After the deal was initially announced, observers noted that having Canada’s largest banks and pension funds controlling the largest exchange and dark pool, together handling a substantial portion of domestic order flow, would be a concern for the Canadian trading landscape. CDS Clearing and Depository Services would also be under the control of the entity. This so-called vertical silo model of integration is also one of the main issues the regulators are considering in the NYSE Euronext-Deutsche Borse merger.

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