TMX Broadcast Centre manager Kris Backus pauses in front of the centre's display board in Toronto on Monday May 16, 2011.Frank Gunn/The Canadian Press
The two sides vying for TMX Group Inc. are launching a crucial public relations battle to gain support from regulators and investors, with London Stock Exchange Group PLC trying to poke holes in the bank-led Maple Group bid.
Xavier Rolet, the CEO of LSE, argued in an interview Thursday that the Maple bid is monopolistic and that its value is uncertain. Maple plans to roll other assets into the TMX, but those assets are privately held, so it is not yet clear what they are worth.
But Maple head Luc Bertrand sought to frame the Maple plan in patriotic terms as the best one for Canadian capital markets.
The two sides have only weeks to try to sell shareholders, politicians and regulators on their competing visions for the future of Canada's main market operator and on the values of the bids.
TMX wants to merge with LSE to create a pan-Atlantic player with a focus on resource listings. That stock-swap bid is worth about $45.59 based on current trading.
The Maple Group of nine banks and pension funds wants to buy a majority of TMX to keep it locally owned, then roll in more Canadian assets to create a more dominant national player before embarking on an international expansion. Maple says its bid is worth $48 a share; $33.52 of that is cash.
TMX and LSE plan shareholder votes on their merger proposal in just over a month's time, while Maple is rushing to get its hostile bid in front of shareholders.
Mr. Rolet criticized the bid from Maple as lacking key information on valuation, such as what Maple will have to pay to acquire the bank-backed Alpha trading system and the CDS Inc. clearinghouse, the key to the Maple plan. He suggested that those assets could cost as much as $2-billion, and said shareholders of TMX need to know how that would be paid for. "We think Alpha is close to $1-billion and the clearinghouse is probably worth even more," he said. "Is that going to come in for cash? Is that going to come in for equity?"
Mr. Bertrand, in a separate interview, said he couldn't give any details because Alpha and CDS are not publicly traded but said: "I don't think it's constructive to be throwing around numbers like that." Mr. Bertrand is the public face of Maple, and a senior executive at National Bank of Canada, one of the four banks in the Maple group. The other three are TD, CIBC, and Scotiabank.
The five pension funds include some of Canada's biggest, such as the Canada Pension Plan Investment Board and the Caisse de dépôt et placement du Québec.
That roster should give confidence that even though there's little detail on some aspects of the Maple bid, the value is there, Mr. Bertrand said. "You've got nine senior financial institutions in the Maple consortium. We've done our homework." Mr. Bertrand stressed that Maple's plan is better for Canada's capital markets because it will create an integrated exchange company, known in the industry as a silo, that can offer new services and will fetch a premium valuation.
"As a shareholder, I say to myself this is a really neat opportunity, because this company will be vaulted into the comparables of the Deutsche Boerse, Hong Kong, the Australian Stock Exchange, and you know what? I like those valuations."
Mr. Rolet argued that those examples should strike fear into the hearts of regulators and market users, because the reason they trade at such high prices is because they are virtual monopolies. "Those are closed, hermetically sealed silos that collect monopoly rents," he said.
Shareholders of TMX, meantime, bid up the company's stock, pushing it closer to the value of the Maple bid. The stock closed Thursday up 69 cents at $44.26, signalling investors are growing a bit more confident that Maple will succeed.