A $3.8 billion bid to take over the operator of the Toronto Stock Exchange came two steps closer to winning provincial approval on Thursday, driving up shares of Canada’s TMX Group even though a competition review could still scupper the deal.
In Francophone Quebec, Autorité des marchés financiers said it intends to approve the proposal by Maple Group, a consortium of 13 banks and other financial institutions, despite concerns it would create a near-monopoly in Canadian securities trading.
In a separate statement, Maple said the Ontario Securities Commission is drafting terms and conditions that could allow the OSC to approve the deal. A 30-day public comment period will follow before a final decision by the OSC.
The so-called draft orders suggest that Maple is closer to resolving any objections that the regulator covering the financial hub of Toronto raised when the proposal was unveiled.
“It sounds like they may have some sort of a deal,” said Doug Clark, an expert in market structure and managing director of research at Investment Technology Group. “Maple Group and the OSC may have agreed on some sort of terms to get this thing through.”
Still, Canada’s federal Competition Bureau said on Thursday that it has serious concerns about the proposed takeover, repeating a view expressed in November.
If its bid is successful, Maple would control some 85% of Canadian stock trading, and drastically alter the structure for clearing and settling transactions.
In addition to the exchanges already owned by TMX, the plan calls for the acquisition of Alpha Group, the TSX’s biggest competitor, as well as Canadian Depositary for Securities, or CDS, a clearing house run by some of the banks that belong to Maple.
“A significant and material change to the competitive consequences to the proposed transaction would be required to sufficiently address the commissioner’s serious concerns ...,” spokeswoman Alexa Keating said on Thursday.
Quebec - home to TMX’s Montreal Exchange for derivatives -and Ontario - home to the Toronto Stock Exchange and the small-cap TSX Venture Exchange - held separate hearings on the deal late last year. Regulators have been silent about their intentions since then, making investors uneasy.
On Thursday morning, TMX shares jumped more than 4% to $45.69, their highest since Maple made its $50-a-share offer official last June.
“It signals optimism on the part of investors that the deal is going to get done,” said Tom Caldwell, chairman of Caldwell Financial, which holds TMX shares. “It’s the first movement, the first sound we’ve heard in a long time of radio silence on this matter.”
In another sign that the deal was making progress, Maple said it was in discussions with its investors and lenders to extend support agreements beyond an April 30 deadline.