Just before Christmas, TMX Group delivered its term sheet for a proposed merger with London Stock Exchange Group. In it, TMX demanded that it be able to appoint just one less board director than LSE, and the group also stipulated a share exchange ratio that gave it a bigger portion of the merged company than what LSE had in mind.
It has been reported that these terms created an impasse between the two groups. That's still true. But TMX's new circular proves that the rough patch was much shorter than previously thought.
After negotiating for months, TMX handed its terms to LSE on Friday, Dec. 17. On the Monday, LSE said it was having trouble wrapping its head around the proposal because it was a much bigger exchange. Yet just two days later, LSE backtracked and agreed to most of the terms.
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The reversal gives some credence to the theory that LSE knew it needed to make something happen with TMX or lose its last chance to make its play to stay afloat in the exchange world. However, other factors were surely at play, such as Christmas being right around the corner.
In the end, LSE didn't put up much of a fight.
The circular also points out that TMX made these demands because it was seriously worried about getting the deal past Investment Canada. Everyone knew that this threat was always a factor, but it's interesting to see how much it helped as a negotiating tactic. Had Investment Canada not struck down BHP Billiton's bid to buy Potash Corp. of Saskatchewan just two months earlier, TMX might never even have tried for such strong Canadian influence. Or if TMX had, under an alternative Potash scenario, LSE might have pushed back much harder.