Nearly five months have passed since TMX Group Inc. announced its proposed merger with London Stock Exchange Group PLC.
Now, as the clock ticks ever closer to next week's critical shareholder vote, the Canadian-backed rival group is mounting a public relations blitz in a last-ditch effort to capture as many swing votes as possible.
Maple Group Acquisitions Corp., a consortium of 13 major Canadian financial institutions, took out full-page newspaper ads this week and dispatched Luc Bertrand, the group's public head, to make the media rounds on Friday. It has also scheduled an investor conference call for Monday morning, the day before shareholder votes must be cast so that they are counted by Thursday's general meeting.
At an editorial board meeting of The Globe and Mail, Mr. Bertrand referred to TMX as a "crown jewel" that was being delivered on a "silver platter," referring to Maple's fear that the Toronto exchange would lose its global stature if a combined TMX and LSE were swept up in even more consolidation down the road.
Mr. Bertrand is also championing a bid that's now $2-per-share higher than its original offer, although the TMX board of directors announced late on Friday that it still supports the LSE deal.
Time is running out for Maple to make its case, but that is only part of its problem. The group is also on the defensive because it has found itself on the wrong side of the influential decisions made by shareholder advisory firms Glass-Lewis and Institutional Shareholder Services. Both argued that the TMX/LSE combination is the safer option because Maple's bid comes with too much debt and too many regulatory issues. These opinions matter because many large mutual funds and pension funds pay for this advice so that they don't have to drill down into the details themselves.
Mr. Bertrand pushed back on the debt issue on Friday, noting that it's a topic LSE head Xavier Rolet has also used as a talking point. "Sure, today we're being criticized by him as being the most leveraged exchange, and that will hinder growth," he said. "The fact is, this thing is going to spin off a lot of cash."
Maple has already estimated synergies worth 79 cents per share in 2012, Mr. Bertrand said, and wrapping the Canadian Depository for Securities into the fold will only boost margins because it simplifies back office processing. Maple argues that these savings will boost margins, serving up more earnings to pay back the debt.
Mr. Bertrand also noted that the consortium's 13 financial institutions are comfortable with leverage of at least three times TMX's earnings before interest, taxes, depreciation and amortization, and that should be a vote of confidence for investors. However, he did not elaborate on why the banks, investment dealers and pension funds simply don't offer up more cash from their own coffers to quell the concerns.
"We're comfortable with that level and we can pay it down quickly," he said. Plus, "$2-billion [in equity]is nothing to sneeze at. Why isn't the LSE putting up any equity?"
Maple isn't the only firm making comments leading up to the vote. Bank of Canada Governor Mark Carney made his first public statement about the competing bids on Friday. Rather than take sides, Mr. Carney argued that the Bank is most concerned with ensuring Canadian regulatory bodies will have control of securities clearing, particularly for over-the-counter derivatives.
To date, some people have speculated that the Bank would favour Maple's bid for because it's Canadian, but in an interview with The Wall Street Journal, Mr. Carney said he isn't opposed to either deal.
"Obviously if the [clearing]arrangements are in Canada and all aspects of the arrangement are in Canada -management, risk systems, risk committee - and we have a direct line of sight and oversight to it, that's easy," Mr. Carney said.
If clearing management rested outside of Canada or is "harmonized with other clearing systems elsewhere for efficiency reasons," the central bank "would need to decide the extent [to]which we could rely on other authorities as principal oversight, something we have not done in the past," Mr. Carney said.
Mr. Bertrand has been selling his pitch for two months now, and a sign of fatigue showed up on Friday when he used the "silver platter" reference for the second time in the same conversation. "I'm going to tire you guys out with that one, aren't I?" he said, before laughing.
But ultimately his message was the same as it has been since day one, which is the belief that a cross-border exchange isn't necessary to attract capital in today's markets.
"If you want to buy or sell stock in Brazil today, you can easily do it by picking up the phone," he said. "You don't have to interconnect all these exchanges."