If the Maple Group deal to buy TMX Group Inc. falls through, look for the company to start writing cheques.
TMX Group chief executive officer Tom Kloet says he's fully behind the company's planned sale to Maple Group, but if regulators scotch the deal he signalled he's not averse to spending some of the almost $500-million that TMX has on its balance sheet.
Mr. Kloet is in the Maple deal with "both feet," he said on the company's earnings conference call Wednesday morning. But pushed for answers on what the company would do as a Plan B if the Maple deal dies, he laid out some options.
For the moment, TMX is constrained in what it can do with its capital under the support agreement with Maple (so no dividend increase this quarter, folks.) But if the transaction fails, the chains come off. Given that TMX has a clean balance sheet on the debt side, there's not much reason to be sitting on a half billion of cash on the asset side that's earning zilch.
First off, he said there will be opportunities to "make the company bigger" through acquisitions. But, he said, the company will balance opportunities for growth with other possibilities such as dividends and share buybacks.
Merger arbitragers who have jumped into TMX stock in hopes of cashing in on the Maple bid of $50 a share are counting on the company to bail them out with a special dividend if the deal doesn't happen, limiting their downside. Mr. Kloet's words are going to be very welcome to those investors.
There wasn't much hopeful guidance given on the Maple transaction. TMX executives said they were working with regulators on finding solutions to their concerns.