The London Stock Exchange faced an increasingly bitter battle for control of Canadian peer TMX Group - and its own destiny - after rival bidder Maple Group took its higher offer directly to shareholders. The Maple Group of Canadian banks and pension funds turned hostile on Wednesday with its C$3.6 billion ($3.7 billion) bid after TMX's board rejected the offer although it trumps the LSE's $3 billion agreed all-paper bid.
Maple, whose group includes some of TMX's top customers, said it was forced to circumvent the board after TMX and the LSE said shareholders would vote on the deal on June 30.
Maple accused the LSE and TMX on Wednesday of "accelerating the timing of their meeting" to put pressure on TMX shareholders but the LSE rejected this idea on Thursday. "There was no acceleration to the timetable, this is exactly as we envisaged. The shareholder meeting dates were filed a couple of weeks ago and we remain on track for Autumn 2011 completion," said an LSE spokeswoman on a telephone interview.
The hostile approach by Maple, which hopes to galvanise simmering nationalistic opposition to a foreign take-over of Canada's main exchange, leaves TMX shareholders facing a decision that could determine not only the fate of TMX but also that of the LSE.
Scooping up TMX is likely to make the LSE too large to be a realistic take-over target for rivals such as US exchange Nasdaq OMX and the Singapore Exchange, both of which have seen their merger plans dashed in recent weeks. If it fails, it risks being left a sitting duck as predators circle. But Maple still faces an uphill struggle.
The decision by Nasdaq to walk away from its hostile $11.2 billion bid for transatlantic peer NYSE Euronext amid regulatory opposition last week prompted some industry experts to warn that unsolicited exchange bids faced a bumpy road. Maple can certainly bank on its Canadian credentials helping soothe political worries about foreign take-overs. But some experts say watchdogs may baulk at allowing four of the largest Canadian trading firms to take control of the flagship bourse because of vested interests.
The take-over battle also throws a spotlight on the commercial tensions that underpin the exchange operator market. Some of TMX's largest customers, such as RBC Capital Markets and BMO Capital Markets, are advising on the agreed LSE-TMX deal or backing the rival Maple plan.
With banks and pension funds stepping into uncharted territory with their bid for an exchange, all eyes are on shareholders - and regulators. In the meantime, unsurprisingly, the LSE and the Maple Group have clashed over their respective TMX proposals since the consortium laid bare its plan on May 14.
LSE and TMX claim their plan offers longer term value, citing hefty revenue gains and the potential cost-cutting in the years immediately after the merger. The LSE has also talked up the deal for Canada - a crucial test if the merger is to sway local politicians - with LSE Chief Executive Xavier Rolet saying it would allow Canada to expand internationally and move onto the global stage.
Maple countered on Wednesday that TMX senior management and staff would become part of a better-positioned company with "its centre of decision-making and headquarters in Canada". TMX shareholders in Europe were not available for comment. A spokeswoman for the LSE also declined to comment further.
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