TORONTO, May 20, 2011 /CNW/ - TMX Group Inc. responded today to the
proposal provided by Maple Group Acquisition Corporation ("Maple") on
May 13, 2011. The TMX Group Board of Directors has considered Maple's
proposal and has determined, after consultation with its financial
advisors and outside counsel, that for purposes of its merger agreement
with London Stock Exchange Group plc ("LSEG"), the Maple proposal does
not constitute a superior proposal nor could it reasonably be expected
to result in a superior proposal.
"The Board supports TMX Group's proposed merger with LSEG to form a
globally competitive yet domestically focused exchange group with
strong opportunities for growth," said Wayne Fox, Chair, Board of
Directors, TMX Group. "The Board's view is that the merger with LSEG
continues to be in the best interests of TMX Group and its shareholders
The Board's Determination
In making its determination, the Board considered a number of factors,
including the following:
Having considered the advice of its financial advisors among other
things, the Board believes that the financial consideration proposed by
Maple is inadequate given that the Maple proposal entails a change of
control of TMX Group.
There is a significant increase in leverage associated with the Maple
proposal, which contemplates increasing TMX Group's debt to
approximately 2.9x LTM EBITDA from 1.1x LTM EBITDA currently. This
leverage generates much, if not all, of the earnings accretion
referenced in the Maple proposal and could constrain TMX Group's
ability to execute and implement strategic opportunities in the future
without providing offsetting business benefits to TMX Group.
There is inadequate information in the Maple proposal regarding Maple's
future business plans and strategy for TMX Group, particularly with
respect to its projected domestic operating model and plans for
international growth and expansion, nor does the proposal identify the
senior management team who will be responsible for developing the
business plans and strategy going forward.
The Maple proposal does not provide information regarding the values of
Alpha Group and CDS, nor of the economic terms upon which they would be
combined with TMX Group, bringing significant uncertainty to the value
of the non-cash component of Maple's proposal, which constitutes a
material component of the proposed consideration.
The Maple proposal contains significant execution risk associated with
its closing condition of regulatory approval for Maple's acquisition of
Alpha Group and CDS. The Maple proposal also does not describe what
steps Maple would be willing to take to secure the required regulatory
Under the Maple proposal, TMX Group and TMX Group Shareholders bear all
of the regulatory risk and the Maple proposal contains no compensation
for TMX Group if regulatory approvals are not received.
Merger with LSEG
TMX Group entered into the merger with LSEG as the best path forward for
TMX Group, its shareholders and stakeholders. The merger provides the
opportunity for TMX Group and its shareholders to participate in the
creation and on-going growth of a new, globally competitive exchange
group, with several important benefits expected for stakeholders,
The acceleration of TMX Group's growth plans.
Preservation of TMX Group's businesses in Canada, particularly its
regulatory advantages and its deep know-how and world leading
capabilities in resource and small and medium enterprises.
Opportunities for Canadians to play a meaningful role in building a
global leader in the exchange sector.
An improved ability to attract new foreign investment to Canada and to
facilitate access to the world's largest international capital pool for
Canadian issuers of all sizes.
An opportunity to achieve global leadership in derivatives trading and
clearing, including through the continued development of leading-edge
The ability to market Canadian trading technology leadership to exchange
operators and businesses around the world.
A strengthening of Canada's brand and leadership on the world stage.
The expected benefits of the proposed merger are described in detail in
the applications of TMX Group and LSEG to each of the Ontario
Securities Commission, the Autorité des marchés financiers, the Alberta
Securities Commission and the British Columbia Securities Commission
dated May 13, 2011 which are posted on the websites of each of those
entities. The benefits of the merger with LSEG will be achieved while
guaranteeing existing local regulation and oversight over all Canadian
regulated exchanges currently in TMX Group, including Toronto Stock
Exchange, TSX Venture Exchange, Montreal Exchange and NGX.
The Board has directed that the efforts that are currently underway to
secure the necessary regulatory and shareholder approvals required to
complete the proposed merger with LSEG be continued.
The Maple Proposal
Maple was formed by a group of nine investors, including Alberta
Investment Management Corporation, Caisse de dépôt et placement du
Québec, Canada Pension Plan Investment Board, CIBC World Markets Inc.,
Fonds de solidarité des travailleurs du Québec (F.T.Q.), National Bank
Financial Inc., Ontario Teachers' Pension Plan Board, Scotia Capital
Inc. and TD Securities Inc.
Under the Maple proposal, on a fully prorated basis, each share of TMX
Group would be exchanged for $33.52 in cash plus 0.3016 of a share of
Maple. According to the Maple proposal, after giving effect to it, the
existing TMX Group Shareholders would own approximately 40% of Maple's
outstanding shares, Maple's pension fund investors would own
approximately 35% of Maple's outstanding shares and Maple's bank-owned
investors would own approximately 25% of Maple's outstanding shares.
The Maple proposal contemplates that TMX Group, once controlled by
Maple, would subsequently combine with Alpha Group and CDS, subject to
approval of the shareholders of those entities. The proposal does not
contain the terms upon which this combination would take effect or
confirm that the shareholders of those entities would agree to such
Under the Maple proposal, Maple's bank and pension fund investors would
appoint eight nominee directors, with additional independent directors
to be determined in consultation with TMX Group. Each bank and pension
fund investor would have the on-going right to nominate one director
each year for election for so long as such investor holds at least 5%
of Maple's outstanding shares.
The financing for the Maple proposal would consist of equity capital
contributions by each of the Maple investors or their affiliates, and
unsecured debt financing from a syndicate of Canadian banks. Maple's
proposal anticipates outstanding debt of approximately $1.1 billion if
it were to be completed. Maple has also stated that it expects the
transaction to be significantly accretive to TMX Group's earnings per
share (adding approximately $0.50 to TMX Group's consensus 2012E EPS of
$3.48), even without the benefit of Maple's potential combination with
Alpha Group and CDS. Maple also has stated that it plans to maintain
TMX Group's current annual dividend.
The Maple proposal is subject to a number of significant conditions,
receipt of all competition/anti-trust approvals considered necessary or
desirable by Maple, all on terms and conditions satisfactory to Maple,
acting reasonably, including approval for the combination of TMX Group
with both Alpha Group and CDS;
receipt of all securities regulatory authorities approvals, consents and
confirmations considered necessary or desirable by Maple, all on terms
and conditions satisfactory to Maple, acting reasonably, including
approval for the combination of TMX Group with both Alpha Group and
approval of the proposal by TMX Group shareholders.
Caution Regarding Forward-Looking Information
This press release contains "forward looking information" (as defined in
applicable Canadian securities legislation) that is based on
expectations, estimates and projections as of the date of this press
release. Examples of forward looking information can be identified by
the use of forward-looking words such as "plans", "expects", and
"expected". Forward looking information, by its nature, requires us to
make assumptions and is subject to significant risks and uncertainties
which may give rise to the possibility that our expectations or
conclusions will not prove to be accurate and that our assumptions may
not be correct. These factors, many of which are beyond our control,
include: market competition; business and economic conditions
generally; the level of trading and activity on our markets, and in
particular trading in our key products. Additional information about
these and other factors are located in reports filed with Canadian
We have no intention to update this forward looking information, except
as required by applicable securities law. This forward looking
information should not be relied upon as representing our views as of
any date subsequent to the date of this press release.
About TMX Group (TSX-X)
TMX Group's key subsidiaries operate cash and derivative markets for
multiple asset classes including equities, fixed income and energy.
Toronto Stock Exchange, TSX Venture Exchange, Montreal Exchange,
Canadian Derivatives Clearing Corporation, Natural Gas Exchange, Boston
Options Exchange (BOX), Shorcan, Shorcan Energy, Equicom and other TMX
Group companies provide listing markets, trading markets, clearing
facilities, data products and other services to the global financial
community. TMX Group is headquartered in Toronto and operates offices
across Canada (Montreal, Calgary and Vancouver), in key U.S. markets
(Houston, Boston and Chicago) as well as in London. For more
information about TMX Group, visit our website at www.tmx.com.
SOURCE TMX GROUP INC.
For further information:
Director, Corporate Communications