LSE bid on knife edge as TMX battle heats up

A brace of sweetened offers has failed to sway shareholders in the race to buy the operator of Canada’s biggest stock exchange, and time is running out ahead of a June 30 shareholder vote, Reuters reported on Thursday.

Shareholders said the London Stock Exchange must raise its friendly bid for TMX Group significantly before they will back the proposal, which now includes a welcome cash element in the shape of a special dividend.

But anti-trust concerns could derail the second offer too, a now-sweetened proposal from a consortium of Canadian banks, pension funds and financial services firms.

“From a game perspective or a strategy perspective, they’re now basically where they were before,” said Alison Crosthwait, director of global trading strategy at Instinet, which runs Canada’s second biggest alternative trading system.

She added, “What surprises me is that increasingly I’m hearing a little bit of ‘Perhaps, neither of the bids will happen…’ So there’s still risk in this.”

The battle for TMX Group is part of a global wave of consolidation of exchanges seeking to expand geographically and in terms of the products they offer.

LSE Chief Executive, Xavier Rolet, wants to beef up the London bourse to fight off rivals, nimble new market entrants and predators. He says his “merger-of-equals” will create a transatlantic powerhouse in mining and energy equities.

The offer, if approved by shareholders from both companies at separate June 30 meetings, must still be approved by Canadian Industry Minister Christian Paradis, who has to decided if the deal is of net benefit to Canada.

The 13-member Canadian Maple Group consortium says the LSE proposal will leave a key Canadian asset in foreign hands.

In back-to-back sweeteners on Wednesday, the LSE added a cash component to its all-stock bid in the shape of dividends to shareholders of both exchanges, bringing the bid’s value to just under C$49 a share.

Maple responded hours later by raising its cash-and-stock offer to C$50 a share, from C$48.

“I told (the LSE) they’d better bump the price or get off the deck,” said Richard Fogler, a large TMX shareholder who said he met with the LSE on Wednesday.

President of Kingwest and Company investment firm in Toronto, Fogler, added: “If the LSE wants to win, they have to change their price.”

ISS, a proxy advisory firm with influential shareholder clients, recommended the LSE proposal and said it would yield cost savings, new issuer listings and beef up the group’s global position.

TMX stock was up by 2.4 per cent in Toronto at C$45.30 a share. LSE shares were broadly flat at 953.5 pence, bucking a weaker FTSE 250 index.