TORONTO - The longstanding proposed takeover of the TMX Group cleared a number of key regulatory hurdles on Wednesday, perhaps most importantly from the Competition Bureau.
The federal regulator said it will not challenge the attempt to takeover the operator of Canada's major stock exchanges by the Maple Group Acquisition Corp., a factor that could've potentially sidelined the transaction.
Meanwhile, the Ontario Securities Commission gave its approval and published final recognition orders for the deal which values the TMX Group at $3.8 billion.
Maple spokesman Luc Bertrand said the approvals were "a very major milestone" for the consortium of 12 Canadian banks, pension funds, brokerages and insurers leading the bid.
"My understanding is that it was a lot of work between the bureau and the OSC (to) satisfy that post-transaction there would be a regulatory structure that addresses the bureau's concerns," he said in an interview.
Competition Commissioner Melanie Aitken said the bureau had serious concerns, but that they had been addressed.
"While the bureau has an independent mandate to review mergers, the bureau provided input and advice to the OSC for its consideration relating to the potential impact on competition that could result from the proposed transactions," Aitken said in a statement.
"The measures contained in the OSC's final recognition orders materially change the regulatory environment sufficient to substantially mitigate the bureau's competition concerns."
The OSC orders set out the terms under which Maple will be permitted to operate a combined exchange and clearing group involving the TMX along with the alternative Alpha system, Canadian Depository for Securities Ltd. and CDS Clearing and Depository Services Inc.
Quebec's securities regulator, the Autorite des marches financiers, previously published final recognition orders with respect to Maple's proposed acquisition of TMX Group and Alpha.
Both Maple and the TMX Group said they have since been advised that the AMF will soon issue a final recognition order approving Maple's proposed acquisition of CDS.
The proposed takeover still requires approval by the British Columbia and Alberta securities regulators, though Bertrand expressed confidence in both.
"Alberta is well in the pipeline," he said, noting that regulatory concerns about the TSX Venture Exchange are being discussed with B.C. regulators.
"We're working through that with B.C. and like all the other discussions we have had with regulators over the month we ultimately find solutions — business solutions and regulatory solutions."
The Maple consortium has already extended its deadline several times as it awaits full approval for the plan that would see it control as much as 90 per cent of trading activity in Canada.
Takeover talks have stretched on for more than a year, starting first in February 2011 when a merger was announced with the owner of the London Stock Exchange. When that transaction was defeated by shareholders, the TMX threw its support behind the Maple bid last October.
Maple now believes that the transaction can close before the end of July, the latest deadline set by the consortium.
Thomas Caldwell, chairman of Caldwell Securities Ltd., which owns a stake in TMX Group, said he is pleased that the proposal is closer to completion, but that it "has taken an incredibly long time."
"The salient points of this deal were known within the first week, and I do think it's ironic that securities regulators who demand full and timely disclosure from their registrants took a rather long view of this," he said in an interview.
"I don't think it's any secret — we preferred London to this, but we prefer this to nothing."
Meanwhile, Maple also said Wednesday that Kevin Sullivan, deputy chairman of GMP Capital Inc. (TSX:GMP), will serve as a nominee to the Maple board from the independent investment dealer community.
In order to satisfy a requirement in the final OSC and AMF recognition orders that the Maple board include no more than 50 per cent representation from the original shareholder group, GMP has agreed to withdraw from the consortium.
Maple's offer to acquire a minimum of 70 per cent and a maximum of 80 per cent of the shares of TMX Group for $50 in cash per share is open until on July 31.
Assuming the minimum of 70 per cent of the TMX shares are acquired for cash under the offer, former TMX shareholders would ended up owing 41.7 per cent of Maple. If the maximum of 80 per cent are acquired, former TMX shareholders would own 27.8 per cent of the new company.
The investors in Maple are the Alberta Investment Management Corp., Caisse de depot et placement du Quebec, the Canada Pension Plan Investment Board, CIBC World Markets Inc. (TSX:CM), Desjardins Financial Group, Dundee Capital Markets Inc. (TSX:DC.A), Fonds de solidarite des travailleurs du Quebec, National Bank Financial & Co. Inc. (TSX:NA), Ontario Teachers' Pension Plan, Scotia Capital Inc. (TSX:BNS), TD Securities Inc. (TSX:TD) and Manulife Financial (TSX:MFC).