Guest Contributor: Renée Colyer, CEO, Forefactor
The announcement that the “Maple Group Acquisition Corporation” has submitted a bid to acquire TMX Group does not come as a shock to me.
Why would the banks and pension funds form a consortium to keep the TMX in Canadian hands? Fear.
Fear trumps all things. As a professional with a background in psychology I can tell you unequivocally, that is the truth.
But what is there to fear?
Loss of control – the potential loss of an oligopoly and more competition playing on the Canadian financial institutions’ playground (given that we already have US & European broker dealers and ATSs). Would it be good for TMX Group to defer the potential to become a larger part of the global economy? My inclination is to say “no” but of course my crystal ball remains silent on that count. These institutions believe they are protecting their businesses, protecting their investments and their clients – perhaps they are, perhaps they are hindering them. Or, perhaps they would like to own TMX Group and sell it to the next bidder.
So, TMX Group will go through the exercise of reviewing the offer and my crystal ball says they will turn it down because according to TMX’s press release on the matter, this non-binding proposal’s terms provide for a “combination of cash and equity consideration stated to be at a premium to the current market price of TMX Group shares.” The proposal also involves a number of significant conditions, including regulatory approval for the combination of TMX Group with both Alpha Group and CDS Inc., but does not specify the means for satisfying these conditions.” The words, “significant conditions” and the fact that they were not informed regarding how to meet said conditions doesn’t seem like a positive beginning.
Aside from the ambiguous nature of the Maple Group proposal, I don’t believe the TMX Group wants to be acquired by the banks and seek approval from them and the companies those institutions already own (Alpha and CDS). Given that they have already agreed to merge LSEG it is obvious that they want to grow and be a significant part of the consolidating Exchange industry. Next, I would expect my crystal ball to predict, the Maple Group will fight against any decision that is not a resounding “yes”. Escalation to the Canadian government level will be the logical the next step to overturn a “no” from TMX and so it will be left in the hands of the Conservatives to decide the fate of the Exchange and Canada’s position on globalization. If pressure is put on them to “preserve” Canada, I would expect the will of the Canadian people to be the ultimate decision-maker.
Industry sources believe that Maple Group’s acquisition offer is tantamount to declaring war with the TMX. The TMX Group demutualized from the brokers in 2002 and launched their IPO. Now, the banks, along with the others from the financial community, have returned to take back what is sometimes referred to as “one of Canada’s greatest assets”. There are many unanswered questions involving this bid. For example, are there no regulatory implications if the banks own a publicly traded Exchange and they are the underwriters of many of the IPOs listing on said Exchange? What happens to the fee structure? Should the banks be in control of what the Exchange charges them for trading and accessing market data? Will the shareholders accept such an arrangement? Going backward instead of forward doesn’t usually make sense to me – unless of course we can figure out a way to reverse the aging process but still retain all of the knowledge gained by moving forward.