03/15/2012 09:03 EDT | Updated 05/15/2012 05:12 EDT

Competition Bureau next big hurdle for Maple takeover bid for TMX

MONTREAL - The federal Competition Bureau remains the next hurdle for the Maple Group after two key provincial regulators moved closer Thursday to approving the takeover of the company that operates the Toronto Stock Exchange.

The Competition Bureau said its review of the bid remains a priority as it assesses the impact on equities trading and post-trade services (clearing, settlement and depository services).

However, bureau spokeswoman Alexa Keating said in an email that "a significant and material change to the competitive consequences" of the proposed transaction would be required to "sufficiently address the commissioner's serious concerns communicated to the parties in November."

The bureau wouldn't say what additional information it is seeking or when a decision would be made.

However, securities regulators in Quebec and Ontario indicated Thursday they were moving closer to approving the offer.

The Autorite des marches financiers said it intends to approve the transaction while the Ontario Securities Commission has instructed its staff to develop draft recognition orders with detailed terms and conditions. Those draft orders will be subject to a 30-day public comment period prior to a final decision.

"While the Competition Bureau is monitoring the evolution of Maple’s proposed acquisitions of TMX Group, Alpha Group and CDS, the bureau's review is independent and the bureau will reach its own conclusions," Keating said.

Maple Group spokesman Luc Bertrand said it continues to provide information and to have discussions with the Competition Bureau to address all its concerns.

"We're working on all fronts...(but) the OSC decision and the AMF decision are very important milestones," he said in an interview.

Maple said it will seek an extension to the April 30 deadline to complete the transaction. But Bertrand declined to say when the deal may close.

"In these transactions, until the final approval is given, you have to work until you get that final one and then close the transaction."

The bid by Maple Group Acquisition, a consortium of 13 Canadian financial institutions and pension funds, also requires approval of regulators in Alberta and British Columbia.

The AMF said Maple has provided commitments that it believes will maintain the integrity and efficiency of the financial markets as well as the continuity of derivatives operations in Quebec.

"We're satisfied with the results of discussions to date with Maple and with the scope of the undertakings that Maple will be required to provide," said Mario Albert, the Quebec regulator's chief executive.

He added that the conditions that Maple will be required to accept will ensure the AMF will be able to fully assume its role and responsibilities as a regulator.

However, Bertrand seemed to downplay any changes, saying the commitments are "very in line with what was elaborated in 2008 at the time of the combination of the TSX and the MX."

The Quebec regulator said it took into account comments made during public consultations, including the continuity of derivatives operations in the province.

It said the conditions it intends to impose will adequately address this key issue along with corporate governance, market access, fees and the framework of Maple's operations.

Maple enhanced its initial undertakings by committing to maintain and develop its derivatives trading and related products operations, including over-the-counter derivatives in Montreal.

It will also establish a derivatives committee of the Maple board of directors for advice on all matters related to its derivatives business and develop all enhancements to the SOLA application software in Montreal.

"We believe that this undertaking in principle to maintain and continue to develop Montreal as a hub of attraction for Maple's derivatives trading and related products operations, including over-the-counter derivatives, is vital for a robust derivatives industry in Quebec," Albert said.

Maple continues to commit not to allow any person or company to acquire more than 10 per cent of its voting shares without prior approval of the regulator.

The TMX Group runs the Toronto Stock Exchange and TSX Venture exchange as well as energy trading and other businesses.

The takeover offer values the company at about $3.8 billion.