TMX Group Inc. reported a drop in second-quarter profit on Friday, as weak equity markets hurt trading volumes and dried up the pipeline for new listings and financings just as the Toronto Stock Exchange operator gets set to be acquired by Maple Group.
The weakness in equity markets was partly offset by higher trading volume on its energy market - the Natural Gas Exchange - and increased revenue from options and derivatives trading and clearing platforms such as the Montreal Exchange, Boston Options Exchange and the Canadian Derivatives Clearing Corp (CDCC).
“TMX Group advanced its strategic and operational goals at a time of continued uncertainty in global markets,” said Chief Executive Tom Kloet in a statement. “While these macroeconomic conditions impacted our financial performance, we benefited from the asset-class diversity of our business.”
The quarter brought substantial charges related to TMX’s proposed $3.8-billion takeover by the Maple consortium - a 12-member group that includes some of Canada’s biggest banks, pension funds and insurers.
Maple recently won approvals from provincial regulators and the federal Competition Bureau to take over TMX. Maple will put TMX and its biggest domestic rival, Alpha Group, under the same umbrella along with clearing house Canadian Depository for Securities Ltd.
This week, TMX said the Maple transaction is proceeding and urged shareholders to tender their shares ahead of the July 31 bid deadline. TMX agreed to back Maple’s bid last October, after initially rejecting the unsolicited offer that was put together to foil TMX’s friendly deal the London Stock Exchange.
Maple touted its proposal as the best way to keep Canadian exchanges out of foreign hands, while ensuring that Toronto was able to maintain its status as a financial hub.
“We are moving forward with the Maple transaction and look forward to a successful conclusion of the tendering process on July 31,” said Mr. Kloet, adding that the deal provides value for shareholders, expands its business and enhances international competitiveness.
Net income in the quarter ended June 30 fell 97 per cent to $1.8-million, or 2 cents a share, down from $54.7-million, or 73 cents, a year earlier, largely due to a $54.4-million charge related to the Maple deal.
The charge included a $29-million break fee due to the London Stock Exchange and $23.4-million in legal, advisory and other costs.
Excluding these and other one-time items, earnings dropped to 81 cents a share from 94 cents.
Revenue fell 1 per cent to $167.5-million, reflecting lower revenue from new listings, financings and equity trading.