Four new financial companies have joined a rival Canadian-only bid to a proposed merger of the Toronto and London stock exchanges.
Maple Group Acquisition Corp. announced Sunday that Desjardins Financial Group, Dundee Capital Markets, GMP Capital Inc. and Manulife Financial have signed on as investors.
Manulife (TSX:MFC) is Canada's largest insurance company and Desjardins the biggest credit union, with major financial operations in Quebec. Dundee and GMP are smaller Bay Street wealth managers.
Maple, made up of a who's who of Canada's major financial players -- including several major banks --put forward a $3.6 billion bid to acquire TMX Group (TSX:X), which owns the Toronto exchange.
TMX rejected the bid, saying it breeds too many uncertainties, including regulatory and debt risks.
The bid from LSE is worth about US$3 billion.
On Sunday, the TMX declined to comment on the new Maple Group partners.
The TMX Group rejection prompted Maple to go directly to shareholders with its offer and it hopes the addition of more big investors will send them a stronger signal.
Maple Group's news release didn't indicate if it would sweeten the pot, but spokesman Luc Bertrand says the additional investors are another indication that its offer is superior to the merger with the London exchange.
"Our vision for an integrated exchange provides a better way forward for Canada's capital markets," he said in the release.
Monique Leroux, Desjardins' president and CEO, said the Maple bid for TMX "provides Canadians with an excellent opportunity to collaborate and co-operate in order to maintain a strong and growing financial industry that will enhance our economy both in Quebec and across Canada."
Ned Goodman, chairman of Dundee Capital said: "Canada's small- and mid-cap companies and markets will do better with Maple than they will with the LSE. As an independent broker-dealer, we support Maple's vision."
With no details on how the addition of the new players was going to better the bid financially however, at least one analyst said it wasn't clear how the Maple Group's latest move would help woo the TMX.
"Just because there's more shareholders involved in the Maple Bid doesn't necessarily improve the value of the Maple bid," said John O' Connell, CEO of investment firm Davis Rea Ltd. "I'm not sure what they're adding."
O'Connell said it seems the TMX and the LSE want to pursue their own deal and the Maple Group, for all its Canadian rhetoric, seemed unable to convince the operator of the Toronto stock exchange of its superiority. But if the Canadian contingent were to sweeten its offer, things could change, he said.
"If Maple is making a clearly superior bid, the shareholders will ultimately decide," he said. "Clearly these people are aligning themselves with an all-Canadian solution, but it would appear that the government is OK with a non-Canadian solution. So it's going to come down to financials."
Maple went directly to shareholders last month, announcing an informal $48 per share proposal -- which represents a 24 per cent premium to the implied value of the merger with the LSE Group.
The Maple bid is meant to keep TMX in Canadian hands after many bank and government officials raised concerns about the so-called "merger of equals" with the LSE, which is technically a takeover by the British operator.
But TMX Group is intent on pushing ahead with the London Stock Exchange transaction and has publicly dismissed the threat that shareholders would accept the Maple proposal.
Members of the Maple Group Acquisition Corp. includes Alberta Investment Management Corp., Caisse de depot et placement du Quebec, Canada Pension Plan Investment Board, CIBC World Markets Inc., Fonds de solidarite des travailleurs du Quebec, National Bank Financial Inc., Ontario Teachers' Pension Plan Board, Scotia Capital Inc. and TD Securities Inc.
Maple say if its bid succeeds, existing shareholders of TMX Group will continue to own approximately 40 per cent of Maple's outstanding shares, the public pension fund investors will own approximately per cent, the bank-owned investment dealers will own approximately per cent and the new Maple investors will own approximately seven per cent. It says no Maple shareholder will own more than per cent of Maple's total shares.
The Maple bid contains a major regulatory challenge.
It is dependent on a review by the Competition Bureau, which must rule whether the group can go ahead with plans to acquire the bank-owned alternative stock exchange Alpha Group and the CDS clearinghouse.
Any integration of the operator of the Toronto Stock Exchange and the alternative Alpha trading platform would give the group control of about 80 to 90 per cent of stock trading volume in Canada.
The battle between rival bidders for the TMX Group has grown more fierce and increasingly public as the clock winds down toward that June 30 deadline.
The outcome will determine the future of the Canadian capital markets company, which runs the Toronto Stock Exchange, the Montreal derivatives market, the junior TSX Venture Exchange and other markets.
