The nearly year-old bid for TMX Group (TSX:X), the owner of the Toronto Stock Exchange, is unlikely to receive regulatory approval before the deadline, the consortium of Canadian banks, pension funds, brokerages and insurers conceded Friday.
Still, an update on the status of a review by Canada's competition watchdog prompted both Maple and TMX Group to provide an update on the situation while holding out the option of a deadline extension.
The federal Competition Bureau remains the big hurdle for the takeover deal and it has signalled it would need to see "a significant and material change to the competitive consequences" of the proposed deal to address its serious concerns.
Maple said Friday that the Bureau told the groups that changes proposed by the Ontario Securities Commission— which have not yet been made public — could alter the deal to diminish the federal watchdog's concerns.
The OSC has held extensive hearings into the deal's impact on competition in Canada's market sector, including smaller players' concerns that the deal would concentrate 90 per cent of Canadian trading activity at TMX and that it could charge unfair prices as a result.
The Competition Bureau said Friday that it provided input to the OSC on issues it should consider when weighing the potential impact of the deal on competition.
"It is possible that the OSC’s recognition orders could materially change the regulatory environment such that, if enforced, our serious concerns may be substantially mitigated," Greg Scott, spokesman for the bureau said in a statement.
"Naturally, we cannot have final views until there are final recognition orders, and we have had the opportunity to speak to the market with that materially different context in mind."
Maple said pushing back the deadline rests on the group being satisfied with the progress of the regulatory process, as well as takeover discussions with the alternative trading platform Alpha Trading System, and clearing and depository firm CDS Inc.
Shares in TMX —which owns the Toronto Stock Exchange TSX Venture Exchange and Montreal Exchange among other trading platforms — rose 4.6 per cent or $1.95 to close at $44.70 Friday, as investors appeared to take the developments as a positive sign the deal could be approved.
Thomas Caldwell, chairman of Caldwell Securities Ltd., which owns a stake in TMX Group said he believes the offer deadline will be extended and eventually approved, but added the drawn out process has been tough on shareholders.
"It's interesting how securities regulators demand full and timely disclosure except when it comes to them of course, and to drag this out for a year is really a joke because what do you do? Buy, sell, hold?"
Any potential closing of the deal could still be months away, which would mean the bid will see its one-year anniversary on May 15th.
The draft recognition order from the OSC is subject to a 30-day public comment period and other provincial regulators have indicated they would undergo a similar process. The Competition Bureau has indicated it will not make a final decision until it has time to consider both the published draft order and any final orders, Maple said.
Regulators in Quebec, B.C. and Alberta have also signalled their intention to publish public notices on the deal, it added.
Quebec's Autorite des marches financiers said last month it intends to approve the transaction. But it will also publish a 30-day comment period regarding Maple's proposed acquisition of CDS.
Maple needs regulatory approvals to merge TMX with the alternative Alpha and CDS, which are owned by the major players in the Canadian securities industry, several of which are part of the consortium.
The Maple investors are also in active negotiations among with Alpha and the Canadian Depository for Securities Ltd. and their shareholders regarding the price and terms of those acquisitions.
Peter Block, spokesman for Maple Group said "there's been progress, but we don't have a deal yet."
He added that there is no guarantee the offer will be extended because "if any or all of (Maple's 13 members) say 'we don't think there's enough progress ... it could be withdrawn," or the proposal could go ahead with fewer members.
Maple had originally aimed to have definitive agreements for those takeovers prior to the closing of the TMX deal.
The proposed Maple deal offers to buy 70 per cent of TMX for $48 per share, plus a process that will see current TMX shareholders receive a 40 per cent stake in the new company in exchange for their remaining shares.
Maple investors would end up holding the remaining 60 per cent.
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.
TMX Group's board originally supported a merger proposal with the London Stock Exchange Group and dismissed the Maple Group offer over a number of debt, competition and regulatory concerns.
But after the LSE deal failed to gain enough shareholder support in the face of the richer Maple bid last June, the board turned its attention to the Maple offer.
Maple is made up of Alberta Investment Management, Caisse de depot et placement du Quebec, Canada Pension Plan Investment Board, CIBC World Markets, Fonds de solidarite des travailleurs du Quebec, National Bank Financial, Ontario Teachers' Pension Plan Board, Scotia Capital, TD Securities, Desjardins Financial Group, Dundee Capital Markets, GMP Capital and Manulife Financial.