Despite conflict of interest concerns, the Maple Group bid for TMX Group (X-T), and its plan to combine it with Canada’s clearing and settlement agency for securities, has passed muster with all the regulators charged with assessing the deal.
The British Columbia Securities Commission (BCSC) and the Alberta Securities Commission (ASC) approved the takeover yesterday, following approvals by Canada’s Competition Bureau and the Ontario Securities Commission (OSC) last week. (See OSC clears Maple Group’s $4B bid for TMX Group.) The BCSC also approved the Maple Group’s planned takeover of clearing and settlement agency, the Canadian Depository for Securities (CDS) and the Canadian Derivatives Clearing Corp.
Maple must meet the conditions laid out by the OSC and the BCSC, meant to ensure adequate oversight of the resulting entity, that conflicts of interest are properly managed, that 50% of Maple directors are independent (i.e. not linked to any of the original Maple Group companies) and to ensure the interests of small-cap companies are represented.
With 50% of TMX Venture Exchange companies based in British Columbia, the BCSC was particularly interested in protecting Venture companies and the Venture exchange. As such, it will require at least 25% of the Maple board’s directors have Canadian Venture market experience and expertise.
The Maple Group consists of 12 of Canada’s large traders: Alberta Investment Management Corp., Caisse de dépôt et placement du Québec, Canada Pension Plan Investment Board, CIBC World Markets, Desjardins Financial Group, Dundee Capital Markets, Fonds de solidarité des travailleurs du Quebec, National Bank Financial, Ontario Teachers’ Pension Plan, Scotia Capital, TD Securities and the Manufacturers Life Insurance Co. The TMX takeover and associated plans to buy CDS will give the group a near monopoly on Canada’s trading infrastructure.
The group formed in response to a bid for TMX Group by the London Stock Exchange early last year that the members feared would lead to the demise of Canada's vibrant financial institutions and stock exchanges.
TMX shareholders currently have until July 31st to tender their shares to Maple’s friendly, $50-per-share offer. The deal requires 70% of shares to be tendered. If Maple Group, a consortium of banks, insurance companies and pension funds, meets all the conditions laid out by the regulators by the end of July, it will extend offer to Aug. 10 to give a maximum of 80% of shareholders to tender their shares.
Assuming shareholder approval, the group will be renamed TMX Group Ltd. on Aug. 10. It expects to complete the acquisition of CDS (for $167.5 million) as well as alternative trading system Alpha Trading System (for $175 million), on Aug. 1.
Maple may not be finished there. Separately, the Wall Street Journal reported yesterday that the TMX Group is in talks to acquire the fourth-biggest stock market in the U.S., Direct Edge Holdings. Any deal would have to wait until the Maple-TMX deal goes through.
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