Bloomberg News

TMX Is Focused on Integration, Not Acquisitions, CEO Says

October 15, 2012

TMX Group Inc. (X) will focus on integrating recent acquisitions before seeking another deal, Chief Executive Officer Thomas Kloet said, the latest indication that no takeover of Direct Edge Holdings LLC is imminent.

“I’m not thinking about a big transaction,” Kloet said in an interview at the World Federation of Exchange’s annual conference in Taipei. “I’ve got to integrate CDS and Alpha and that’s a big job. It’s at the heart of Canada’s markets plumbing. Anything on M&A is secondary to this.”

Maple Group Acquisition Corp., the owner of TMX whose 12 members include Toronto-Dominion Bank, Ontario Teachers’ Pension Plan and Manulife Financial Corp., completed acquisitions of the Canadian Depository for Securities Ltd. clearing house and exchange operator Alpha Trading Systems in August.

“It’s a little bit more complex than we thought in the beginning,” Kloet said. “These kinds of integrations usually take a year at least to piece together. We are about a year away from full integration -- that includes planning and execution. I want to do it right.”

The comments come one month after Direct Edge Chief Executive Officer William O’Brien said the company is focused on expanding its business on its own. The Wall Street Journal reported in July that TMX was negotiating to acquire the fourth- largest U.S. stock exchange operator.

No Discussions

“We’re not having discussions with anybody about a significant transaction,” said O’Brien, whose Jersey City, New Jersey-based company owns two U.S. equity exchanges, in a Sept. 19 interview. “There are no discussions currently ongoing.”

Speculation over a Direct Edge sale dates to December, when the U.S. Justice Department made the divestiture of Deutsche Boerse AG (DB1)’s stake, held through its International Securities Exchange unit, a condition of its merger with NYSE Euronext. (NYX:US) European regulators blocked the trans-Atlantic union two months later and the Frankfurt-based exchange never sold.

TMX bought 16 percent of the Bermuda Stock Exchange last year and a majority stake in the Boston-based BOX Options Exchange LLC.

Maple Group is creating an exchange operator that would control more than 85 percent of Canada’s equities trading, the Montreal Exchange derivatives bourse and the country’s main securities clearing house. The company would combine the Toronto Stock Exchange, TSX Venture Exchange and Alpha Exchange.

“I’m spending about 80 percent of my time on the integration,” Kloet said. “That doesn’t mean we’d sit on the sidelines for a year. This doesn’t stop us from talking to people.”

LSE Merger

TMX had an agreement last year to combine with London Stock Exchange Plc. (LSE) It failed to get shareholder support and the deal was scrapped in June 2011. By last October, TMX agreed to a transaction with Maple. More than $30 billion of global exchange mergers have been scuttled in the last two years.

Thomas Caldwell, chairman and chief executive officer of TMX holder Caldwell Securities Ltd., said on July 5 that the company should seek takeovers of global competitors.

“I don’t want to do a transaction just for the sake of doing one,” Kloet said. “With LSE, we were stronger together, and that’s a litmus test we’d put on any transaction.”

To contact the reporter on this story: Nandini Sukumar in London at nsukumar@bloomberg.net and @NandiniSukumar on Twitter

To contact the editor responsible for this story: Andrew Rummer at arummer@bloomberg.net and @AndrewJRummer on Twitter


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