TSX Group and Montréal Exchange join forces to create TMX Group

    -   Combination creates an integrated, multi-asset class exchange group
    -   Combination strengthens Montréal's position as the Canadian centre
        for derivatives expertise
    -   MX shareholders to receive 0.5 of a common share of TSX Group and
        $13.95 in cash, after the effect of full proration
    -   Represents $39.00 in value per MX common share based on the
        November 28, 2007 unaffected price of TSX Group common shares
    -   Represents $42.56 in value per MX common share based on the
        December 7, 2007 closing price of TSX Group common shares
    -   MX Board of Directors recommends that MX shareholders vote in favour
        of the combination

    MONTREAL and TORONTO, Dec. 10 /CNW/ - Montréal Exchange Inc. (MX) and
TSX Group Inc. (TSX Group) today announced that they have agreed to combine
their organizations to create TMX Group Inc. (TMX Group), a leading integrated
exchange group.
    "This combination grows out of a common vision for the future of the
Canadian capital markets. Customers in Canada and internationally will benefit
from increased liquidity levels, accelerated product development, a fully
diversified product suite, and superior technology," said Richard Nesbitt,
Chief Executive Officer of TSX Group. Luc Bertrand, President and Chief
Executive Officer of the Montréal Exchange continued, "The new group will
redefine the Canadian capital markets and strengthen its global positioning.
TMX Group will list, trade, clear and offer market data for both cash and
derivatives markets across multiple asset classes."
    "We are creating a new exchange group that builds on the respective
strengths and successes of both organizations," said Mr. Bertrand. "I am
enthusiastic about the future of the derivatives markets that Montréal
Exchange has been building for many years. Through this agreement, Montréal
will remain the centre of Canada's derivatives markets."
    "The combination is an important milestone in the development of the
Canadian capital markets, delivering benefits to all market participants and
the shareholders of both organizations," said Mr. Nesbitt. "We believe that an
integrated national exchange is the optimal solution to meet the evolving
requirements of our broader customer base."
    The head office of TMX Group will be located in Toronto. The Board of
Directors, with 18 members initially, will be chaired by Wayne Fox, the
current chair of TSX Group. It will include five MX designated board members,
including Mr. Bertrand. The agreement requires that 25% of the directors of
TMX Group be residents of Québec.
    The head office of MX and the derivatives trading and related product
operations will remain in Montréal. The Canadian Derivatives Clearing
Corporation (CDCC) will expand its clearing mandate and continue to have its
head office in Montréal. MX will also continue to manage the Montréal Climate
Exchange as it develops into a leading market for exchange traded
environmental products in Canada. The Autorité des marchés financiers (AMF)
will continue as the lead regulator for MX's operations. TMX Group will remain
subject to a 10% ownership restriction, amendments to which will require the
approval of each of the Autorité des marchés financiers and the Ontario
Securities Commission.
    Under the terms of the agreement, Mr. Nesbitt will be the Chief Executive
Officer and Mr. Bertrand will be the Deputy Chief Executive Officer of
TMX Group. Mr. Bertrand will continue in his role as President and Chief
Executive Officer of MX. He will also assume responsibility for information
technology of the TMX Group.

    Compelling Strategic Rationale for the Combination

    The combination of TSX Group and MX will create a leading exchange group
encompassing multiple asset classes and comprising a broad range of cash and
derivatives operations. By bringing together their respective knowledgeable
and experienced teams, TMX Group will have the resources and scale to develop
and successfully market new capital markets products, high value data services
and to offer an integrated clearing solution to an enlarged and international
customer base. Furthermore, TMX Group expects strong prospects for growth
outside of Canada, particularly in the U.S. via MX's interest in Boston
Options Exchange (BOX), to which TMX Group is strongly committed. This will
place TMX Group in the best position to compete in today's rapidly evolving
and increasingly competitive global financial marketplace.
    As an integrated exchange, MX offers trading and clearing of standardized
financial derivatives products on its proprietary technology platform both in
Canada and abroad, including through its significant ownership interest in
BOX. MX's trading volume in its core markets grew at a compound annual growth
rate (CAGR) of 29% from 2002 to 2006. MX's product portfolio is fully
complementary to that of TSX Group, and with the combination, TSX Group is
investing in a high growth business while further diversifying its revenue
    TSX Group owns and operates Canada's pre-eminent equity markets that list
more mining and oil & gas issuers globally than any other exchange group.
Trading volume of the 3,942 issuers listed on its equity exchanges grew at a
CAGR of 21% from 2002 to 2006. TSX Group also owns Natural Gas Exchange, a
leading North American exchange for the trading and clearing of natural gas
and electricity contracts, and Shorcan Brokers Limited, Canada's first fixed
income inter-dealer broker.
    The combination is expected to create significant value for TSX Group and
MX shareholders through TMX Group's enhanced growth profile and opportunity to
realize meaningful synergies. Cost synergies of $25 million per annum are
targeted. These synergies are expected to be achieved through optimizing
technology platforms, rationalizing premises and data centres and reducing
corporate costs. Depending on the closing date, synergies will be partially
phased in during 2008, with most of the synergies expected to be realized in
2009. In addition, revenue synergies will be targeted through the development
of new trading, clearing and market data products and by leveraging the
broader platform across multiple asset classes.
    "The transaction will result in a fully integrated marketplace creating a
strong platform from which to continue our international expansion strategy,"
said Wayne Fox, Chair of TSX Group. "We look forward to building on Montréal
Exchange's success and to contributing to the continued growth of Montréal's
financial sector."
    "The MX Board of Directors has approved entering into this transaction
and recommends that MX shareholders vote in favour of the combination," said
Jean Turmel, Chairman of the Montréal Exchange. The agreement we have reached
delivers significant shareholder value and will enhance Montréal's position in
the national and global derivatives business."

    Terms of the Agreement

    MX and TSX Group have entered into a combination agreement (Agreement)
pursuant to which TSX Group will indirectly acquire all of MX's outstanding
common shares for total consideration of 15.3 million TSX Group common shares
and $428 million in cash.
    Under the terms of the Agreement, MX shareholders will receive, at the
election of each holder:
    -   0.7784 of a common share of TSX Group (the equivalent of $39.00 as at
        the market close on November 28, 2007, being the last business day
        prior to the confirmation of combination discussions by both
        companies), or
    -   $39.00 in cash,
    for each common share of MX, subject in each case, to proration.

    After the effect of full proration, each MX shareholder will be entitled
to receive 0.5 of a common share of TSX Group and $13.95 in cash.
    Those directors and officers of MX who hold approximately 7.0% of MX
common shares outstanding, have irrevocably agreed to vote their shares in
favour of the amalgamation.

    Financial Parameters of the Arrangement

    TSX Group plans to satisfy the cash portion of the purchase price and
other transaction-related capital management initiatives through:

    -   available cash on hand, and
    -   a three-year $430 million term facility and a three-year $50 million
        revolving credit facility underwritten by BMO Capital Markets and
        Caisse Centrale Desjardins.

    With this financing plan, TMX Group will move to a more efficient capital
structure. Additionally, TMX Group may continue to make purchases under its
existing normal course issuer bid (NCIB) and may, at its expiry, renew its
NCIB to permit the repurchase of up to 10% of its pro forma common shares,
subject to market circumstances and applicable regulatory requirements.
TMX Group intends to continue TSX Group's existing dividend policy.
    In connection with TSX Group's existing NCIB announced on August 1, 2007,
TSX Group will be terminating its pre-defined plan with its appointed broker
that permits TSX Group to repurchase its common shares at times when TSX Group
would ordinarily not be active in the market.
    The combination is expected to be accretive to earnings per share before
transaction amortization in 2009, provided the company repurchases the maximum
number of common shares available under the NCIB.

    Transaction Process

    The combination will be effected by way of an amalgamation of MX with an
indirect wholly-owned subsidiary of TSX Group under Part1A of the Companies
Act (Québec), requiring the approval of two-thirds of the votes cast by the
shareholders of MX. A special meeting will be held to consider the
amalgamation on or about February 13, 2008. The combination will also be
subject to any required minority approvals under securities laws and to
regulatory approvals, including approvals of the AMF, the Competition Bureau,
Toronto Stock Exchange, the United States Securities and Exchange Commission
and to certain other customary conditions for an agreement of this nature.
    The amalgamation is expected to close in the first quarter of 2008. At
the time of its next annual shareholders' meeting, TSX Group Inc. will propose
changing its name to TMX Group Inc.

    Other Transaction Terms

    MX has agreed to pay TSX a termination fee of $46 million in certain
circumstances if the amalgamation is not completed. The Agreement includes
customary non-solicitation and right to match provisions. Full details of the
amalgamation will be included in an information circular which will be mailed
to MX shareholders on or about January 14, 2008.

    Financial and Legal Advisors

    BMO Capital Markets and Desjardins Securities acted as financial advisors
to TSX Group. In addition, TSX Group's Board of Directors received fairness
opinions from the company's financial advisors that the consideration to be
provided under the amalgamation is fair from a financial point of view to
TSX Group. UBS Securities acted as strategic advisor to TSX Group with respect
to the international aspects of the transaction.
    Citigroup Global Markets and National Bank Financial acted as financial
advisors to MX. In addition, MX's Board of Directors received fairness
opinions from the company's financial advisors that the consideration to be
received under the amalgamation is fair from a financial point of view to MX
    Davies Ward Phillips & Vineberg acted as legal counsel to TSX Group and
Ogilvy Renault acted as legal counsel to MX. Cleary Gottlieb Steen & Hamilton
acted as U.S. counsel to TSX Group.

    Non-GAAP Financial Measures

    Earnings per share (EPS) before transaction amortization does not have a
standardized meaning as prescribed by Canadian GAAP and is therefore unlikely
to be comparable to similar measures presented by other issuers. We may
present this measure in order to quantify the impact of combining TSX Group
with MX on financial performance and cash flows. Management will use this
measure to assess the effectiveness of combining organizations to serve
customers and grow our business.

    Forward-Looking Statements, Risks and Uncertainties

    This press release contains forward-looking statements, which are not
historical facts but are based on certain assumptions and reflect our current
expectations. These statements relate to, among other things, anticipated
financial performance, business prospects, strategies, regulatory
developments, new services, market forces, commitments, synergies, and
technological developments. Forward-looking statements are typically
identified by words such as "believe", "plan", "outlook", "anticipate",
"continue", "estimate", "may", "will", "should", "could", and similar
expressions. These forward-looking statements are subject to a number of risks
and uncertainties that could cause actual results or events to differ
materially from current expectations. Neither TSX Group nor MX undertakes to
update or revise any forward-looking statement that may be made from time to
time by either of them or on either of their behalf. Some of the risk factors
that could cause actual results to differ materially from current expectations
are: competition from other exchanges or marketplaces, including alternative
trading systems, new technologies and other sources, on a national or
international basis; dependence on the economy of Canada; failure to retain
and attract qualified personnel; geopolitical factors which could cause
business interruption; dependence on information technology; failure to
implement our respective strategies; changes in regulation; risks of
litigation; failure to develop or gain acceptance of new products; adverse
effect of new business activities; dependence of our trading operations on a
small number of clients; the risks associated with NGX's and CDCC's clearing
operations; the risks associated with the credit of our customers; our cost
structures being largely fixed; and dependence on market activity that is
outside of our control. A description of the above mentioned items and certain
additional risk factors are discussed in our materials, including TSX Group's
2006 Annual MD&A and Annual Information Form, MX's 2007 Non-offering
Prospectus and other continuous disclosure documents filed with the securities
regulatory authorities in Canada from time to time. The risk factors outlined
in the previously mentioned documents are specifically incorporated herein by
reference. Our business, financial condition or operating results could be
materially adversely affected if any of these risks or uncertainties were to
materialize. Given these risks and uncertainties, investors should not place
undue reliance on forward-looking statements as a prediction of actual
    This news release does not constitute an offer to sell or the
solicitation of an offer to buy any securities of TSX Group. Such an offer may
only be made pursuant to a management information circular filed with or
furnished to the securities regulatory authorities in Canada and the United
States in connection with the proposed amalgamation. MX plans to file a
management information circular with Canadian provincial securities regulators
and TSX Group intends to file a registration statement with the United States
Securities and Exchange Commission ("SEC") which will include the management
information circular or to furnish the management information circular to the
SEC pursuant to an exemption from registration. Investors and security holders
are urged to read the management information circular regarding the proposed
business combination when this document becomes available because it will
contain important information in respect of the proposed transaction.
Investors may obtain a free copy of the management information circular when
it becomes available on SEDAR at www.sedar.com and a free copy of the
registration statement and/or the management information circular when it
becomes available on the SEC's website at www.sec.gov. The management
information circular may also be obtained for free, once it has been mailed to
MX shareholders, on MX's website www.m-x.ca or by directing a request to MX.

    About TSX Group Inc.

    TSX Group operates Canada's two national stock exchanges, Toronto Stock
Exchange serving the senior equity market and TSX Venture Exchange serving the
public venture equity market, NGX, a leading North American exchange for the
trading and clearing of natural gas and electricity contracts and Shorcan, the
country's first fixed income inter-dealer broker. TSX Group also owns Equicom,
a leading provider of investor relations and related corporate communication
services in Canada. TSX Group is headquartered in Toronto and maintains
offices in Montréal, Winnipeg, Calgary and Vancouver.

    About Montréal Exchange Inc.

    MX is the Canadian derivatives exchange. MX offers trading in Canadian
interest rate, index and equity derivatives. Clearing, settlement and risk
management services are provided by an AA rated clearing house, the Canadian
Derivatives Clearing Corporation, fully owned by the MX. MX's integrated
trading and clearing services are supported by a proprietary suite of exchange
technologies, known as SOLA(R). MX also has interests in: the Boston Options
Exchange (BOX), a U.S. automated equity options market, for which MX is the
technical operator; the Canadian Resources Exchange (CAREX), a new corporation
created with NYMEX that is dedicated to developing the Canadian energy market;
and the Montréal Climate Exchange (MCeX), a joint venture with the Chicago
Climate Exchange(R), aiming to establish the leading market for publicly
traded environmental products in Canada.

    Teleconference/Audio Webcast

    MX and TSX Group will host a teleconference / audio webcast to discuss
the transaction

    Investor Conference Call

                                December 10 at 8:30 a.m.: Financial
                                analysts' teleconference.

    In English:                 514 861-4190
                                1-800-952-4972 (toll-free in North America)

    In French:                  514 861-1531
    (simultaneous translation)  1-877-461-2815 (toll-free in North America)

                                A replay will be available until Monday,
                                December 17, 2007. To access the replay,
                                please dial 514 861-2272 or 1-800-408-3053.
                                For English, enter passcode 3245469 followed
                                by the number sign.
                                For French, enter passcode 3245470 followed
                                by the number sign.

    Media Conference Call

                                December 10 at 10:00 a.m.: Media

    In English:                 514 861-1681
                                1-866-225-0198 (toll-free in North America)

    In French:                  514 861-4190
    (simultaneous translation)  1-877-667-7766 (toll-free in North America)

                                A replay will be available until Monday,
                                December 17, 2007. To access the replay,
                                please dial 514 861-2272 or 1-800-408-3053.
                                For English, enter passcode 3245472 followed
                                by the number sign.
                                For French, enter passcode 3245474 followed
                                by the number sign.

    These teleconferences will be Webcast live and archived for 90 days on
the MX website: www.m-x.ca as well as the TSX website: www.tsx.com.


    The WEB links are :

    8:30 a.m.



    10:00 a.m.



For further information:

For further information: Steve Kee, Director, Corporate Communications,
TSX Group (416) 947-4682, steve.kee@tsx.com; Paul Malcolmson, Director,
Investor and Public Relations, TSX Group, (416) 947-4317,
paul.malcolmson@tsx.com; JeanCharles Robillard, Director, Investor Relations
and Communications, Montréal Exchange, (514) 871-3551, jcrobillard@m-x.ca

Custom Packages

Browse our custom packages or build your own to meet your unique communications needs.

Start today.

CNW Membership

Fill out a CNW membership form or contact us at 1 (877) 269-7890

Learn about CNW services

Request more information about CNW products and services or call us at 1 (877) 269-7890