* Regulatory barriers tougher for London's TMX bid
* Veto of Potash Corp takeover weighs on sentiment
* Anti-trust concerns not seen as a deal-breaker
(Adds TMX reiterating support for LSE bid)
By Pav Jordan and Trish Nixon
TORONTO, June 24 A Canadian offer to buy the
TMX Group (X.TO) may have the regulatory edge over a friendly
London Stock Exchange (LSE.L) bid that has the pro-Canada lobby
up in arms.
Lawyers and competition experts said neither bid faces
insurmountable regulatory obstacles.
But they say current dynamics favor the Maple Group, the
made-in-Canada consortium of banks, pension funds and financial
services firms that's offering C$3.8 billion for TMX Group, the
operator of Canada's biggest stock exchange.
TMX shareholders are weighing the two offers as exchanges
around the world race to grow and broaden their geographic
reach to fight off rivals and new market entrants.
But politics may be as important as business acumen in
determining which bid regulators approve, after Canada's
government unexpectedly vetoed a foreign takeover last year.
"The system seems a lot more politicized than it has ever
been," said a prominent competition lawyer who is not connected
to the case. "If I were advising on TMX-LSE I would be worried
about that a great deal, because it's a bit more uncertain than
it ever was before."
Seven months ago the government blocked BHP Billiton's
(BHP.AX) $39 billion offer for Canada's Potash Corp (POT.TO),
saying the Anglo-Australian miner's stewardship of the world's
largest fertilizer maker would not benefit Canada.
LSE's bid for TMX faces review under the same Investment
Canada Act that the government used to block the BHP offer. It
was only the second foreign takeover to be overturned since the
Act came in in 1985.
The TMX offer is a far smaller deal, but the political hype
BHP's bid for Potash triggered fierce opposition from
Potash Corp's home province of Saskatchewan about a Canadian
asset falling into foreign hands. And unashamedly pro-Canada
Maple Group was born of opposition to the LSE bid.
"What helped seal the Potash fate was that you had a number
of prominent Canadian business people that raised their
voices," said Rick Powers, of the Rotman School of Management
at the University of Toronto.
"Well, you've got a very similar block of voices coming up
this time, from the banks and the financial institutions that
have become involved in the Maple bid."
In LSE's favor, Canada will be careful that its decision
does not look as though it is discouraging foreign investment,
Even without the shadow of BHP-Potash, experts say the bid
from the LSE -- which has gone to lengths to describe its offer
as a merger of equals -- faces greater challenges.
"If you take a look at the LSE/TMX deal, there are just so
many hurdles," said Powers, noting that the Maple bid must only
get through Canada's federal Competition Bureau, while LSE's
bid also needs a green light from provincial securities
regulators in Ontario and Quebec.
Hearings from these provinces are scheduled for July.
Competition concerns on Maple center around its plan to
wrap in Alpha, Canada's largest alternative trading platform,
and clearing house CDS, giving it more than 80 percent of the
Canadian stock trading market.
But experts don't see that as a dealbreaker.
"The anti-competitive things that the Competition Act may
be concerned about can be addressed by the people that are
regulating them," said Justin Connidis, an expert on mergers
and acquisition law at Canada's prestigious Queens University.
He said the bigger issues will be what conditions
competition authorities impose on the Maple Group and if they
are palatable under its business plan.
Bank of Canada Governor Mark Carney, in an interview
published on Friday, said the central bank would seek
assurances that TMX Group takeover did not impede its ability
to regulate clearing of Canadian financial products.
Carney did not comment on the merits of either bid for TMX,
but suggested that central bank regulatory oversight could be
weakened if clearing arrangements move offshore.
TMX Group reiterated late Friday that it sees the LSE's
offer as superior to the Maple Group's revised bid and urged
shareholders to vote in favor of the transatlantic tie-up.
Shareholders vote on the LSE offer on June 30 and
two-thirds of them must vote in favor of the deal for it to go
ahead. It's not clear that they have the votes to win, given
that Maple's bid is more generous in simple dollar terms.
(Editing by Janet Guttsman)