Ontario Securities Commission sets terms for approval of TMX Group deal

The takeover of TMX Group (TSX:X) by the Maple Group cleared another hurdle Thursday as securities regulators in Ontario and Quebec released their proposed conditions on the deal.

The consortium of banks, pension funds and insurance companies said if the draft orders, which set rules governing aspects such as board composition and share ownership restrictions, are finalized as published after a 30-day review period, it would accept them.

Maple spokesman Luc Bertrand called it an important milestone for the nearly year-old proposed deal, which he hopes will close on July 31.

“In as much as this was a lot of work for all the parties involved, I think what we have done is certainly refreshed a lot of aspects of the regulatory framework in Canada with regards to the exchange business and the clearing business,” he said.

“At the outset that was not one of the intended consequences, but I think that is what has happened here and that’s probably a very good thing.”

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The proposed rules would prevent any shareholder from holding more than a 10 per cent stake in Maple as well as require that at least half of the company’s directors be independent.

The size of Maple’s board will also be larger with 17 directors instead of the 15 that had been first proposed.

The regulators’ approval will be necessary for any new fees or fee models.

The groups had already taken measures to ensure no shareholder owned more than 10 per cent of TMX to comply with existing laws, and has also made promises about boardroom independence and pricing structures. But the OSC order would ensconce those pledges in legislation.

The provincial regulators said they would seek comment on their proposed rules and set a deadline of June 4 to hear from the public.

Maple said it expected the Alberta Securities Commission and B.C. Securities Commission to publish notices as well.

OSC chairman and chief executive Howard Wetston said the provincial regulator will carefully consider the input it receives on the proposed orders before making a final determination.

“The commission has thoroughly reviewed the regulatory issues raised by Maple’s proposal and developed measures necessary to ensure that the public interest is protected,” Wetston said.

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The federal Competition Bureau remains a significant hurdle for the deal.

However, it has recently indicated the terms included in the OSC draft order could go some way to alleviate “serious concerns” it has with the deal.

The federal regulator said Thursday it would work to complete its own review and consult with the industry regarding the conditions imposed by the securities regulators and the changes proposed to the Maple deal.

Maple has offered $50 per share in cash for between 70 and 80 per cent of the shares of TMX Group with the remaining shares later exchanged for a stake in Maple.

Assuming the maximum of 80 per cent of the TMX Group shares are bought for cash under the first step, former TMX Group shareholders will own 27.8 per cent of Maple following the second step.

Shares in TMX closed up 60 cents at $47.10 on the Toronto Stock Exchange.

Maple is made up of Alberta Investment Management, Caisse de depot et placement du Quebec, Canada Pension Plan Investment Board, CIBC World Markets (TSX:CM), Fonds de solidarite des travailleurs du Quebec, National Bank Financial (TSX:NA), Ontario Teachers’ Pension Plan Board, Scotia Capital (TSX:BNS), TD Securities (TSX:TD), Desjardins Financial Group, Dundee Capital Markets (TSX:DC.A), GMP Capital and Manulife Financial (TSX:MFC).


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