* Maple seen extending Jan. 31 bid deadline
* Source says more regulatory clarity possible in coming
* Key issues for regulators are Alpha, CDS, governance
* TMX shares at around C$42, 16 pct below share offer
By Pav Jordan and Jennifer Kwan
TORONTO, Jan 26 A weeks-long silence over
the regulatory fate of Maple's C$3.8 billion ($3.80 billion) bid
for TMX Group is sapping investor confidence in the deal, which
would put Canada's dominant financial markets operator under the
control of its big banks and pension funds.
More than a half-year after Maple Group offered to buy TMX
(X.TO) for C$50 a share, the stock is trading at just C$42, and
some investors are shedding their investments for fear that
regulators will reject the proposal as anti-competitive.
"My sense is that, with the radio silence that’s going on,
that there might be some challenges or something breaking
loose," said Thomas Caldwell, chairman of Caldwell Financial Ltd
and a TMX shareholder. "I think there have been some folks
lightening up a bit of stock."
If regulators reject the deal, the shares could drop as much
as C$8, he said, while it could rise by the same amount if the
deal wins approval.
Critics say the Maple plan, which must run a gauntlet of
provincial and federal regulatory authorities, would create an
unfair exchange monopoly. It would put investors at the mercy of
the 13 major banks, pension funds and other financial
institutions that comprise the Maple Group.
The deal would put the TMX's Toronto Stock Exchange and the
TSX Venture Exchange for small-cap stocks under the same roof as
Alpha Group, TMX's largest competitor. The plan is contingent on
the consortium's full acquisition of Alpha, now owned by some of
the institutions that make up Maple.
Another sticking point is governance of the company and
whether the board will properly represent the interests of
market players outside of the major bank broker-dealers.
Timeline on TMX takeover saga [ID:nN1E7AT081]
LONG, CONVOLUTED PROCESS
Maple plans to extend its bid for a fourth time in coming
days as it awaits greater clarity from the Competition Bureau,
said a source close to the deal. The current deadline is Jan.
"We will announce our intentions in the coming days," said
Maple spokesman Peter Block, without elaborating.
Maple and the TMX are working closely with regulators, but
the process is so convoluted and multi-layered that it is still
too early to predict an outcome, said the source, who was not
authorized to speak on the record.
"It is a complicated file with complicated issues and
numerous stakeholders," said the source "I would hope that over
the course of the next few weeks that we could have greater
visibility on where we are going to end up."
Maple would also put the exchanges under the same umbrella
as Canadian Depository for Securities, which clears and settles
all trades in Canada. Critics are concerned about plans to
change the clearing house into a for-profit entity.
The Maple bid, announced in June, was initially hostile,
countering a $3 billion offer from the London Stock Exchange
(LSE.L) that opponents said would put Canadian capital markets
under foreign control.
The bids, which came as part of a wave of global exchange
consolidation, drove TMX stock to a year-high of C$45.69 just
before the LSE opted to back away.
First hints from regulators have been inauspicious for Maple
and its supporters. In November, the federal Competition Bureau
expressed serious concerns about the deal, driving TMX stock
down about 3 percent.
The proposal also needs the approval of securities
commissions in four provinces, including Quebec and Ontario.
"It seems the market is careful not to put too much weight
on the offer lest it turn out not to be actionable," said Ed
Ditmire, an analyst with Macquarie Capital in New York.
Greg Eckel, a shareholder and senior vice president at
Morgan Meighen & Associates, said questions about the valuation
of Alpha and CDS are also injecting some element of uncertainty.
"It looks to me as if at best I would give it a 50-50," he
said, in guessing the chances of approval.
($1 = 0.9996 Canadian dollars)
(Editing by Frank McGurty)
((email@example.com)(416 941 8163)(Reuters Messaging:
(C) Reuters 2011 All rights reserved. Republication or redistribution of
Reuters content, including by caching, framing, or similar means, is
expressly prohibited without the prior written consent of Reuters. Reuters
and the Reuters sphere logo are registered trademarks and trademarks of
the Reuters group of companies around the world.