MONTREAL – The rival bidder for the TMX said it is confident that shareholders will refuse to hand the Canadian stock exchange on a “silver platter” to the London Stock Exchange.
“I think our chances are very good,” Luc Bertrand, spokesman for the Maple Group Acquisition Corp., said Monday after speaking to the Montreal Board of Trade.
Bertrand said institutional and retail investors he’s been meeting over the last two weeks have increasingly preferred the $3.7 billion Maple proposal, which includes a continued dividend and accretion of earnings over the long term.
“At the end of the day, if you’re a shareholder you have to do this on the basis of fundamentals – what is good from an investment standpoint.”
Even if the proposed merger with the LSE wins two-thirds support of TMX shareholders at a vote on June 30, it faces an uphill battle winning the backing of regulators in Ontario and Quebec, Bertrand told reporters.
Reversing the 10 per cent rule, which limits how much any investor can own in the Canadian stock exchange or banks, would be “very problematic.”
It’s a fundamental principle in Canada that has allowed the country to outshine others during the last credit crisis, he said.
“Why should we give up to a lesser regulatory environment when the one we currently have has worked so incredibly well for us and has made Canada literally the envy of the world when it comes to the management of our capital markets?”
Bertrand’s assertions were backed up by former Quebec premier Bernard Landry and Michael Sabia, head of the Caisse de depot, which is a Maple Group member.
Sabia said the Maple proposal was far superior to the LSE deal, valued at about US$3 billion, and reinforces Montreal’s strengthening position with derivative markets.
The former Montreal Stock Exchange, acquired a few years ago by the TSX, was a profitable player in the growing derivatives market of futures contracts.
“With Maple we have a promise of growth and it’s growth that counts,” he told reporters.
Sabia added that he’s confident TMX investors will “see the value of the Maple proposal” and vote accordingly.
Landry, a former Parti Quebecois premier and finance minister, said the guarantees included in the LSE bid are “a lot less solid” for the 150,000 direct and 150,000 financial jobs.
He added that Quebec’s interests are well served by the coming together of the Caisse de depot, Quebec Solidarity Fund, Desjardins and National Bank.
Earlier, Bertrand told the business audience, which included many other supporters of the Maple plan, that Canada will lose the ability to navigate its financial services sector into the future if the TMX is handed to the London Stock Exchange.
“Why offer the TMX on a silver platter to the LSE and what are we getting in return.”
He pointed to the comments of LSE chairman Chris Gibson-Smith, who said he didn’t think London is losing anything from the transaction, “but we’ve gained Canada.”
Bertrand said the LSE’s “takeover” of Canada’s main stock exchange is designed to realize its own ambitions while it faces “a precarious situation.”
The Maple offer regroups the TMX, the Maple partners’ Alpha system and clearing and depository services in a model that follows Australia, Hong Kong, Brazil and Germany, he added.
It protects Montreal’s status as the headquarters for derivatives and better positions the TMX to grow the over-the-counter trading that will dwarf stock trading.
“Our concept is to exploit the power of the TMX than to cede it to a third party.”
Bertrand, former president of the Montreal Stock Exchange and vice-chairman of National Bank Financial (TSX:NA), asked the audience to consider the fate of Quebec’s aerospace sector had Bombardier agreed to be shuffled into a division of Brazil’s Embraer or Boeing.
The one knock on the Maple proposal Bertrand has heard from shareholders has resulted from misinformation by the TMX-LSE proponents, he said
“If there’s a negative element right now it’s comments that the proposal by the 13 (partners) is a half-baked proposal or that it’s based on patriotism or fear or provincialism.”
Bertrand declined to say if he thinks his opponents will sweeten their offer, but said the Maple bid is strong and contained a 24 per cent premium before speculation of an LSE takeover boosted its share price.
Following an address last week to the same group, TMX Group CEO Thomas Kloet and LSE chief executive Xavier Rolet refused to speculate on whether they might sweeten their deal or make changes to satisfy concerns of the Quebec government.
They also argued that their offer was vastly superior, in part because it better positions Montreal and Canada to ride the global growth in financial services.
Over the last decade, Canada’s global position has dropped from 15th to 20th in the world, Rolet said.
The proposed transaction would merge the owner of the London Stock Exchange with the TMX Group (TSX:X), creating a $6-billion entity that would be the world’s eighth-biggest securities market.
Comments