The group of 13 financial institutions trying to buy TMX Group Inc. cleared a number of critical hurdles to the $3.8-billion takeover, breathing new life into a deal that a week ago seemed to be floundering.
The bidding consortium, known as Maple Group Acquisition Corp., has struck agreements to acquire the competing Alpha trading system, TMX's largest rival, as well as the trade clearing institution CDS Group. Those deals came together over the weekend, according to sources.
Just as importantly, Maple has also received assurances that regulators, including the Competition Bureau, will finish considering its offer within a reasonable time frame.
Those assurances helped to prevent some members of Maple from abandoning the bid. Smaller players within the group had become increasingly frustrated that hefty legal bills were mounting, while progress appeared to be stalled on the regulatory front. Some had seriously considered backing out of the group.
Now sources said that the bid has new momentum and has been extended to the end of May. The members will have to extend the bid again at that point, and have set the end of July as the current "outside date" for completing the deal.
While the sources suggested that it was the positive signals from regulators that salvaged the offer, the deals for Alpha and CDS were also crucial.
"These agreements are milestones in our effort to realize our vision for a stronger and more globally competitive exchange and clearing organization," Maple spokesman Luc Bertrand said in a press release.
Still, some sources pointed out that there is still work to do on the regulatory front, and cautioned that the transaction still has hurdles to clear with market watchdogs before all the Maple partners will be comfortable paying the $50-a-share that's on the table for the stock exchange operator.
Maple wants to buy TMX and then roll in Alpha to create an even larger player. Alpha is owned by a group of financial institutions, the majority of whom are also part of Maple. Maple said it plans to pay $175-million for Alpha, and has already struck an agreement with 83 per cent of its shareholders, which includes one shareholder who is not part of Maple. Sources said that Bank of Montreal was that shareholder.
Maple has also locked up 71 per cent of the votes at CDS in favour of its bid. If that deal goes through Maple will have paid $167.5-million for the clearing house.
The consortium said that its negotiations for Alpha and CDS were done at arm's length by special committees made up of people who were part of the Maple group, but did not have an ownership stake in Alpha and CDS.
Maple intends to complete the deals for Alpha and CDS either when, or after, its bid for TMX goes through, if it is successful.
The renewed momentum for the bid began late last week, when the consortium received an update from the Competition Bureau, which had said last year that it had "serious concerns" with the offer. It told the group that those concerns could be "substantially mitigated" by rules that the Ontario Securities Commission is considering applying to the merged company if the deal goes through.
However, with the clock ticking down to Monday's 5:00 p.m. (ET) expiration of the bid, some players remained concerned that the regulatory process would still drag on with no end in sight. The Maple consortium, driven by the members who are the strongest supporters of the bid, was then able to make progress with the OSC. While final details are still being settled, the OSC is expected to come out soon with its recognition orders, which must be published for a 30-day comment period.
Quebec's Autorité des marchés financiers and the British Columbia Securities Commission are also expected to publish notices about the deal soon.
The Maple group includes many of the country's largest financial institutions. Its members are the Alberta Investment Management Corp., the Caisse de dépôt et placement du Québec, Canada Pension Plan Investment Board, CIBC World Markets Inc., Desjardins Group, Dundee Securities, Fonds de solidarité des travailleurs du Québec, GMP Capital, National Bank Financial Inc., Ontario Teachers' Pension Plan, Scotia Capital Inc., TD Securities Inc. and Manulife Financial.