A group of Canadian banks and pension funds said on Wednesday it will take its C$3.6 billion ($3.7 billion) bid for TMX Group directly to shareholders after the exchange operator rejected the bid in favor of a friendly offer from the London Stock Exchange.
TMX, parent of the Toronto Stock Exchange, last week rejected the takeover bid from Maple Group and reaffirmed its support for a proposed $3 billion combination with the London Stock Exchange Group that was unveiled in February.
"We are disappointed that the TMX Board declined our repeated invitations to engage us in discussions," said Luc Bertrand, lead spokesman for the Maple Group and vice chairman of National Bank of Canada, which is one of the four Canadian banks and five pension fund managers in the group.
Maple also extended an olive branch to TMX's senior management, suggesting the current leadership - including Chief Tom Kloet - could play a role in the exchange operator's future if the group's offer succeeds.
"Existing TMX Group senior management and employees under the continued direction of TMX's current CEO will have expanded opportunities as part of a bigger and better-positioned company with its centre of decision-making and headquarters in Canada," Maple Group said in its statement.
Earlier on Wednesday, TMX and the LSE said their respective shareholders would vote on the proposed combination on June 30.
"By accelerating the timing of their meeting to consider the LSE takeover, they have given us no choice but to make our offer available directly to TMX Group shareholders," said Bertrand.
A source involved in the proposal earlier on Wednesday told Reuters that the Maple Group sees the TMX rejection as a ploy to secure a higher price.
The TMX takeover battle is part of an intensifying drive by the world's largest exchange operators to attain the scale now thought to be needed to compete in an increasingly global trading environment.
Maple Group said it believes its offer provides superior value for TMX shareholders. The group is confident that the bid will obtain all necessary shareholder and regulatory approvals and close by late fall.
In addition to National Bank, the consortium includes Canadian Imperial Bank of Commerce, Bank of Nova Scotia and Toronto-Dominion Bank.
The pension funds are Alberta Investment Management Corp, Caisse de depot et placement du Quebec, Canada Pension Plan Investment Board, Fonds de solidarite des travailleurs du Quebec (FTQ) and Ontario Teachers' Pension Plan Board. A spokeswoman for the TMX was not immediately available for comment.
The TMX, which also operates the TSX Venture Exchange for small-cap stocks and the Montreal Exchange for derivatives, said its board rejected the Maple Group offer because it was inadequate and too risky.
The TMX argues that under the Maple proposal, TMX and its shareholders bear all of the regulatory risk.
The Maple bid contains no compensation for the TMX if the deal fails to winregulatory approvals, the company has said.
Maple aims to combine the TMX with alternative trading system Alpha Group, which is already owned by Canada's big banks, as well as with Clearing and Depository Services Inc, a hub for clearing transactions.
Such a combination would require approval from the country's Competition Bureau and provincial regulators.
Maple would have to prove to regulators that efficiencies from the proposed plan outweigh competitive concerns.
Maple said it intends to commence the process of making its regulatory applications shortly. The LSE-TMX tie-up also faces its share of regulatory hurdles.
The proposal will also require a green light from provincial regulators and the federal government. Ottawa will scrutinize the deal under the Investment Canada Act, which requires foreign buyouts of Canadian companies to be of "net benefit" to the country. Maple, as an all Canadian group, would not face that test.