TMX deal puts financial firms in charge of exchange

Some of Canada’s biggest financial institutions gained ownership of the country’s main stock exchanges, derivatives bourse and securities clearing house after sealing a $3.73-billion Cdn takeover of the Toronto Stock Exchange owner.

Maple Group Acquisition Corp., whose 12 members include Toronto-Dominion Bank, Ontario Teachers’ Pension Plan and Manulife Finan- cial Corp., yesterday acquired 91 per cent of TMX Group Inc. shares from investors for $50 each in a cash-and-stock offer. Maple today closed its takeovers of the Canadian Depository for Securities Ltd. clearing house and exchange operator Alpha Trading Systems. Maple plans to buy the rest of TMX stock and integrate the company with CDS and the bank-owned Alpha, formerly TMX’s biggest competitor. The Toronto-based company will now need to look abroad for growth, ana- lysts and investors said.

“Now that they’ve consolidated most of the exchangetraded world in Canada into one company, how do you outgrow just the broader Canadian capital markets?” Ed Ditmire, an exchange analyst with Macquarie Group Ltd. in New York, said in an interview. “They’ll have to look internationally for more and more acquisitions, partnerships or new business ventures.”

Maple’s transactions combine Canada’s main equities markets — the Toronto Stock Exchange, TSX Venture Exchange and Alpha Exchange — with Montreal’s derivatives bourse and the country’s securities clearing services. TMX joins Deutsche Boerse AG, Hong Kong Exchanges and Clearing Ltd. and Australia’s ASX Ltd. among exchanges that integrate trading and clearing.

“Having an integrated exchange as a result of combining the clearing and the trading will allow management to develop expanded services,” Luc Bertrand, a Maple director, said in an interview. “We’re going to have much greater ease in reaching out to the participants and offering expanded services when it comes to risk management, better clearing and so forth.”

TMX plans approximately $20 million of annual savings starting in 2014 from its combination, Chief executive Thomas Kloet said in a July 27 earnings call. The company will record $24 million of costs from combining overlapping businesses and consolidating technology.