The operators of the Toronto Stock Exchange and the London Stock Exchange (LSE) have killed a US$3.8 billion proposed merger, saying the controversial deal could not garner enough shareholder support to go ahead.
TMX Group, operator of the Toronto bourse, said on Wednesday that a majority of proxy votes sent in ahead of its annual meeting yesterday supported the merger, but it was “clear” the proposal could not achieve the required two-thirds support from shareholders.
TMX Group chief executive Tom Kloet said the company would now review a rival hostile bid by Maple Group Acquisition Corp, a group of 13 Canadian banks and pension funds.
“Although we will not join forces with LSE Group, our business is strong and I have enormous confidence in the continued success of our company,” Kloet said in a statement.
In a statement, LSE Group chief executive Xavier Rolet said he was “disappointed.”
“We believe the merger would have been a unique opportunity for TMX Group shareholders to be partners in a truly international group, co-located in Toronto and London, focused on growth and opportunity,” he wrote.
TMX says it will pay a US$10.3 million termination fee to the LSE and a further US$29.8 million if the acquisition with Maple goes through within 12 months.
“Maple will continue to diligently pursue receipt of all necessary regulatory approvals and will continue to engage in a constructive dialogue with stakeholders from across the spectrum,” Maple spokesman Luc Bertrand said.
The rejection of the merger with the LSE now puts more pressure on TMX to negotiate a friendly deal with Maple Group, which now has the only bid on the table. The rival bidder’s US$3.7 billion offer has been repeatedly rejected by TMX, mainly because it is considered loaded down with too much debt.
Proponents of both the LSE and Maple Group bids have been waging a media and speaking blitz to win support for their positions in recent weeks, the campaign pitting prominent Bay Street players against each other on either side.
Kloet said that the TMX exchange ownership still opposes the Maple Group bid.
However, now that the LSE deal is dead, two major Canadian banks that had advised on that deal — Royal Bank of Canada and Bank of Montreal — may now be free to join the Maple Group and that could lead to a revised offer with financial conditions more palatable to TMX.
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