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Bidding war for TMX heats up as Maple bumps offer, ISS backs LSE
Maple Group, which comprises 13 prominent Canadian banks and pension funds, announced late Wednesday an increase in its offer to acquire TMX Group (TSE:X), hours after rival bidder London Stock Exchange (LSE) (LON:L) sweetened its proposal to include a $4 special cash dividend.
Maple Group bumped its cash and stock offer for the Canadian stock exchange group to $50 per share, from its latest offer of $48, and increased its maximum cash consideration to 80%, instead of 70%.
The deal, which represents a 30% premium to the implied valuation of the LSE Group's offer as of May 12, is now valued at $3.8 billion, Maple said in a statement.
Maple Group has urged TMX shareholders to vote against the LSE bid, which currently stands at $49 per share, including a $4 special cash dividend it said shareholders will receive upon the deal's close.
While TMX has openly endorsed LSE's bid and rejected the previous Maple offer, the regulator of the Toronto Stock Exchange said it will review Maple Group's offer and decide whether or not it qualifies as superior. Shareholders of TMX are due to vote on the deal on June 30.
"Maple’s offer continues to provide far greater value and certainty than the LSE take-over, as well as a stronger, more valuable and more sustainable business model for the TMX Group going forward," said Luc Bertrand, on behalf of all Maple Group investors.
However, last Friday, TMX Group said that shareholder advisory firm Glass, Lewis & Co., recommended that shareholders vote in favour of the proposed merger with the London Stock Exchange, saying it's less risky than the rival Maple bid.
According to reports, the shareholder advisory firm, whose opinion is quite sought after in takeover wars, cited the amount of loans the Maple Group plans to use for the deal and the fact that it is more difficult to value the Maple offer as it includes stock that is not yet publicly traded, as reasons for the added risk.
Though the Maple deal would allow more control to the Canadian markets, the deal would also need to overcome real competition hurdles, as its approval would create a monopoly in Canadian exchanges; Maple Group's bid involves the combination of TMX with both the new trading system Alpha Group, owned by the bidding banks, as well as CDS Inc., which clears stock trades.
Still, Maple Group said it is confident in its ability to be successful through the approval process, though this attitude doesn't seem to be winning.
Now, less than one day after the Canadian consortium's announcement of its new offer, shareholder advisory firm Institutional Shareholder Services (ISS) disclosed its support for the LSE Group takeover, saying again that the Maple bid carries more risks.
The firm, which specializes in aiding shareholders in voting matters like this, said the Maple bid, whose high leverage is both structurally and strategically risky as ISS said the deal may limit future growth, is no more "compelling" than the LSE offer.
"There is little incentive for shareholders to take that alternate course," the ISS concluded in its recommendation for TMX shareholders to vote in favour of the LSE merger.
