Bloomberg News

LSE, TMX Sweeten Merger With C$660 Million Special Dividend

June 22, 2011

(Updates with investor comment in eighth paragraph.)

June 22 (Bloomberg) -- London Stock Exchange Group Plc and TMX Group Inc. agreed to pay special dividends of C$660 million ($678.9 million) in an attempt to win support for their merger and thwart a rival bid from Canadian banks and pension funds.

TMX shareholders will receive a cash dividend of C$4 a share from the combined company once the takeover is completed, while LSE shareholders will get 84.1 pence ($1.36) a share, the companies said today in statements. About 45 percent of the special payout will go to TMX shareholders.

The two bourses sweetened their merger offer to convince shareholders to vote for their proposal on June 30 and reject a cash and stock offer from Maple Group Acquisition Corp., a group of Canadian banks, funds and insurers that includes Toronto- Dominion Bank and Manulife Financial Corp.

“They’re doing this because they realize their chances are slim of winning the bid,” said Mathieu Roy, a money manager at Louisbourg Investments Inc., which oversees C$1.5 billion in Moncton, New Brunswick, and holds TMX shares. “They realize the market sees the Maple bid as a better financial bid and probably has a better chance of winning approval.”

TMX rose 1 percent to C$44.25 at 4 p.m. in Toronto. The LSE agreement is valued at C$44.90 a share, according to data compiled by Bloomberg. If the special dividend is included, it’s valued at C$48.90, compared with C$48 a share from Maple Group, according to data compiled by Bloomberg.

Keeping Payout

The exchanges also pledged to maintain the dividend at least as high as the current TMX annual payout, which is C$1.60 a share.

TMX Group reiterated today that the Maple bid is not a “superior proposal” and recommended shareholders reject the unsolicited bid. The Maple bid raises “significant” competition and conflict of interest issues, TMX Group said.

“You don’t make a commitment like this until you’re near the end,” said Thomas Caldwell, CEO of Caldwell Securities Ltd. in Toronto, which manages about C$1 billion, including TMX shares. Caldwell supports LSE’s offer.

The Maple Group was formed to present a bid aiming to keep the Toronto stock and Montreal derivatives exchanges in Canadian hands. The group also plans to merge the Toronto bourse with the bank-owned Alpha equity platform, which competes with TMX.

“The board reiterated its recommendation of the merger with LSEG to form a new international company with strong Canadian leadership in both senior management and the board,” TMX Chairman Wayne Fox said in a statement.

Maple’s investors are Toronto-Dominion Bank, Bank of Nova Scotia, Canadian Imperial Bank of Commerce, National Bank of Canada, Caisse de Depot et Placement du Quebec, Canada Pension Plan Investment Board, Ontario Teachers’ Pension Plan, Alberta Investment Management Corp., Fonds de Solidarite FTQ, Manulife Financial Corp., Desjardins Financial Group, Dundee Capital Markets Inc. and GMP Capital Inc.

Peter Block, a Maple Group spokesman, didn’t return a phone call seeking comment.

--Editors: David Scanlan, Nick Baker

To contact the reporter on this story: Sean B. Pasternak in Toronto at spasternak@bloomberg.net; Matt Walcoff in Toronto at mwalcoff1@bloomberg.net.

To contact the editors responsible for this story: David Scanlan at dscanlan@bloomberg.net; Nick Baker at nbaker7@bloomberg.net


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