Maple Group Acquisition Corporation ("Maple"), a corporation whose investors comprise 13 of Canada’s leading financial institutions and pension funds, today commented on the report issued on June 16, 2011 by Glass Lewis & Co., a proxy advisory firm based in San Francisco, California.
In its report, Glass Lewis called Maple’s proposed transaction “strategically compelling” but recommends that TMX Group shareholders should vote for the LSE takeover, largely on the basis that “…[Glass Lewis] believe[s] the LSE-TMX merger has a greater probability of obtaining all necessary regulatory approvals.”
Maple believes this conclusion, and much of the information and analysis in the Glass Lewis report, is deeply flawed. Specifically, Maple noted the following:
- In reaching this conclusion, Glass Lewis does not mention, and appears to give no weight to, the extraordinary condition of the LSE offer which requires provincial securities regulators in Quebec and Ontario to abandon a key Canadian public interest protection limiting any one shareholder from owning more than 10% of TMX Group.
- Glass Lewis does not mention, and appears not to have been aware of or considered, the statement made by Ontario Minister of Finance Dwight Duncan on June 9, 2011, in which Minister Duncan said,
“…the 10% ownership rule for the TMX is critically important…I encourage Industry Canada and, to the extent it becomes involved, the Competition Bureau to, where appropriate, take the decisions of the securities commissions into consideration. The commissions are conducting a public comment process and will carefully consider the views of the public in making their determination about each transaction.”
- Glass Lewis does not mention, and appears not to have been aware of or considered, the statement made by Quebec Premier Jean Charest to Bloomberg News on June 14, 2011, in which Premier Charest said,
“We would much prefer to see ownership in the hands of the Maple Group, if only because we would much rather see Canadian ownership of our stock exchange. What we are first of all interested in is making sure that Montreal is able to preserve [its] niche or expertise [in derivatives trading].”
- Glass Lewis fails to advise its subscribers that the opportunity to take advantage of Maple’s superior offer (or, indeed, any superior offer) will be lost if the LSE take-over is approved by TMX Group shareholders on June 30, 2011 and proceeds.
- Glass Lewis fails to consider or distinguish between the effective veto provincial securities regulators hold over the LSE deal with respect to its condition that regulators abandon the 10% ownership limit, and the approval Maple is seeking from the Competition Bureau, a process which lends itself to the timely and constructive negotiation of remedies, if any are needed. Glass Lewis subscribers who are not familiar with Canadian competition law are encouraged to review Information Bulletin on Merger Remedies in Canada (Sept. 2006) available at: http://www.competitionbureau.gc.ca/eic/site/cb-bc.nsf/eng/02170.html.
In addition to these points, the Glass Lewis report contains additional and serious misstatements of fact. These errors draw into question whether Glass Lewis properly considered or even read the Maple Group Offering Circular Dated June 10, 2011 or Maple’s recent investor presentation, both of which have been available on Maple’s website since June 13, 2011. Specifically:
- The Glass Lewis report provides, and appears to base its conclusions on, outdated and incorrect information regarding the financial terms of Maple’s offer. Correct terms are provided in Maple’s circular, as well as in its June 13, 2011 press release and investor presentation. These and other materials are publicly available at www.abetterexchange.com.
- The report provides, and appears to base its conclusions on, incorrect information regarding the 2012 EPS accretion the Maple transaction generates for TMX Group shareholders. Correct information is provided in Maple’s circular, as well as in its June 13, 2011 press release and investor presentation.
- The Glass Lewis report misapprehends the structure of the Maple transaction. The report states, “Maple is a newly formed company and its shares aren’t publicly traded, adding to the ambiguity of Maple’s offer.” As most investors understand, the use of a newly formed acquisition company is very common in mergers and acquisitions transactions. Upon completion of the Maple transaction, TMX Group will be a wholly-owned subsidiary of Maple, which in turn will be a Canadian regulated public company with approximately 40% of its outstanding shares held by former TMX Group shareholders. In other words, the business Glass Lewis finds difficult to value is the TMX Group.
- Glass Lewis also fails to recognize that the value of acquiring CDS and Alpha only represents upside to the $48.00 per share value of the consideration being offered to TMX Group shareholders, given the expected synergies to be derived from such transactions. The $48.00 per share value is predicated solely on preserving the TMX’s unaffected earnings multiple. Consequently, Glass Lewis’ statement that the offer price per share “isn’t quite as good as it seems” is incorrect. In fact, the value is likely better than it seems.
- In assessing the leverage to be utilized under Maple’s proposed transaction, Glass Lewis appears to rely on publicly discredited comments by LSE CEO Xavier Rolet to the effect that it would cost Maple more than $2 billion to acquire Alpha Group and CDS. Information provided in Maple’s circular, as well as in its June 13 investor presentation, offered some important context in assessing the potential value of Alpha Group and CDS.
- Glass Lewis appears to ignore additional information provided in the circular and on Maple’s June 13 investor conference call to the effect that TMX Group would continue to have an investment grade profile and would have the cash flow and capacity to de-lever to 2.0x EBITDA within two years following completion of the Maple transaction.
- Glass Lewis notes the “value gap between the competing proposals has significantly diminished” but makes no mention of, and appears to have given no consideration to, the likelihood that much or all of the gain in LSE’s stock price since May 18, 2011 is due to the speculation which began on that day of a potential take-over bid by Nasdaq for the LSE. A chart illustrating this point is provided in Maple’s June 13, 2011 investor presentation.
- Glass Lewis notes the LSE transaction is in fact a “takeover of TMX by LSE”, yet goes on to say it also “supports the notion of a ‘merger of equals’.” In explaining its rationale, Glass Lewis argues “a fair balance of power” is achieved by (among other things), the fact the “proposed LSE-TMX board would consist of seven TMX directors and eight LSE directors.” Glass Lewis does not mention, and does not appear to have considered, the fact that the assurances of TMX board representation largely expire after four years.
The Glass Lewis report contains errors and inaccuracies in addition to those cited above.
Details of Maple’s superior offer and the circular supplement soliciting proxies against the LSE take-over plan are available in Maple’s circular, which has been filed on SEDAR and which Maple has commenced mailing to TMX Group shareholders. A copy of the circular, and a letter to TMX Group shareholders, is also available at www.abetterexchange.com.
Maple Urges TMX Group Shareholders to Vote AGAINST the LSE Take-over Plan
Maple is proposing to acquire all of the outstanding common shares of TMX Group in a transaction valued at approximately $3.7 billion. The acquisition is an integrated transaction involving two distinct steps. The first step is to acquire 70% of the TMX shares for $48 per share in cash. The second step is a plan of arrangement that will result in TMX Group shareholders owning 40% of the company and participating alongside us in its future potential growth.
Maple’s offer represents a premium of approximately 20% over the volume-weighted average price of the TMX shares on the TSX over the 20 trading days ending on May12, 2011, the day prior to the date when Maple presented its acquisition proposal to the TMX board, and a premium of 24% over the implied value of the LSE take-over based on the closing price of the shares of the LSE and the Bank of Canada noon exchange rate on May 12, 2011.
Maple urges TMX Group shareholders to carefully consider the information provided in Maple’s circular and then take two important actions:
1. Vote AGAINST the LSE take-over plan by signing, dating and returning the YELLOW proxy before 12:00 Noon (Eastern time), on June 28, 2011; and
2. DEPOSIT their shares to Maple’s offer before it expires at 5:00 p.m. (Eastern time) on August 8, 2011 (unless it is extended or withdrawn) by following the instructions provided in the circular.
TMX Group shareholders are encouraged to call Kingsdale Shareholder Services if they have questions or would like assistance voting their shares and depositing their shares to the Maple offer.
Shareholders can reach Kingsdale by email at contactus@kingsdaleshareholder.com, or by calling toll-free at 1-888-518-1556 (English or Français). Banks and brokers can call collect at 1-416-867-2272.
About Maple Group Acquisition Corporation
The investors in Maple Group Acquisition Corporation are: Alberta Investment Management Corporation, Caisse de dépôt et placement du Québec, Canada Pension Plan Investment Board, CIBC World Markets Inc., Desjardins Financial Group, Dundee Capital Markets Inc., Fonds de solidarité des travailleurs du Québec (F.T.Q.), GMP Capital Inc., National Bank Financial Inc., Ontario Teachers' Pension Plan, Scotia Capital Inc., TD Securities Inc. and The Manufacturers Life Insurance Company.
This press release is not intended to and does not constitute or form part of an offer or invitation to sell or purchase any securities, the solicitation of an offer to buy or sell any securities or an offer to exchange or otherwise acquire any securities, in any jurisdiction, whether pursuant to the offer described in this press release or otherwise. The circular contains important information and TMX Group shareholders are urged to read it carefully before any decision is made with respect to the offer.
The distribution of this press release in jurisdictions other than Canada may be restricted by law and therefore any persons who are subject to the laws of any jurisdiction other than Canada should inform themselves about, and observe, any applicable requirements. This press release does not purport to comply with the laws of any non-Canadian jurisdiction and the information disclosed may not be the same as that which would have been disclosed if this announcement had been prepared in accordance with the laws of jurisdictions outside Canada.
Information for U.S. Shareholders
The offer is being made for the securities of a Canadian company that does not have securities registered under Section 12 of the U.S. Securities Exchange Act of 1934, as amended (the "U.S. Exchange Act"). Accordingly, the offer is not subject to Section 14(d) of the U.S. Exchange Act, or Regulation 14D promulgated by the U.S. Securities and Exchange Commission (the "SEC") thereunder. The offer is being conducted in accordance with Section 14(e) of the U.S. Exchange Act and Regulation 14E promulgated by the SEC thereunder (with settlement being subject to a longer period than would typically apply for securities of U.S. public companies).
The Maple shares to be issued to shareholders (including U.S. shareholders) other than Maple pursuant to the plan of arrangement have not been, and will not be, registered under the U.S. Securities Act of 1933, as amended (the “U.S. Securities Act”), or under the securities law of any state or other jurisdiction of the United States. The Maple shares to be issued pursuant to the plan of arrangement will be issued in reliance upon the exemption from the registration requirements of the U.S. Securities Act provided by section 3(a)(10) thereof and only to the extent that corresponding exemptions from the registration or qualification requirements of state “blue sky” securities laws are available.
All dollar references in this press release are in Canadian dollars. On June 16, 2011, the Bank of Canada noon rate of exchange for U.S. dollars was Cnd. $1.00 - U.S. $1.0159
Notice To Shareholders In The United Kingdom And European Economic Area
The offer is only being made within the European Economic Area ("EEA") pursuant to an exemption under Directive 2003/71/EC (together with any applicable adopting or amending measures in any relevant member state (as defined below), the "Prospectus Directive"), as implemented in each member state of the EEA (each, a "relevant member state"), from the requirement to publish a prospectus that has been approved by the competent authority in that relevant member state and published in accordance with the Prospectus Directive as implemented in that relevant member state or, where appropriate, approved in another relevant member state and notified to the competent authority in that relevant member state, all in accordance with the Prospectus Directive. Accordingly, in the EEA, the offer and documents or other materials in relation to Maple Shares are only addressed to, and are only directed at, (a) qualified investors in a relevant member state within the meaning of Article 2(1)(e) of the Prospectus Directive, as adopted in the relevant member state, and (b) persons who hold, and will tender, the equivalent of at least €50,000 worth of TMX Shares (collectively, "permitted participants"). These documents may not be acted or relied upon by persons in the EEA who are not permitted participants.
With reference to the U.K. Financial Services and Markets Act 2000 (Financial Promotion) Order 2005, as amended (the "Order"), the offer and any materials in relation to Maple Shares is only directed at persons in the United Kingdom that are (a) investment professionals falling within Article 19(5) of the Order or who fall within Article 49(2)(a) to (d) of the Order; (b) holders of TMX Shares at the time of communication of the offer and such materials; or (c) persons to whom they may otherwise lawfully be communicated (collectively, "relevant persons"). In the United Kingdom, Maple Shares are only available to, and the offer may only be accepted by, relevant persons who are also permitted participants, and as such, any investment or investment activity to which this document relates is available only to, and may be relied upon only by, relevant persons who are also permitted participants.
Caution Regarding Forward-Looking Information
This document contains "forward-looking information" (as defined in applicable Canadian securities legislation). This information is based on the current expectations, assumptions, projections, estimates and other factors that the management of Maple and its investors believe to be relevant as of the date of this document. This information is naturally subject to uncertainty and changes in circumstances. The forward-looking information contained in this document includes, but is not limited to, statements relating to the proposed acquisition of TMX Group by Maple, and the effects thereof, and the proposed subsequent combination with Alpha Group and CDS, and the effects thereof, and other statements other than historical facts.
Often, but not always, forward-looking statements and forward-looking information can be identified by the use of the words ''expect'', ''will'', ''intend'', ''estimate'', ''may'' and similar expressions. Forward-looking statements are necessarily based upon a number of factors, estimates and assumptions that, while considered reasonable by Maple and its investors, are inherently subject to significant business, economic and competitive uncertainties and contingencies. Readers are cautioned that such forward-looking statements and information involve known and unknown risks, uncertainties and other factors that may cause the actual financial results, performance or achievements of Maple and/or its subsidiaries to be materially different from the estimated future results, performance or achievements expressed or implied by those forward looking statements and information and the forward-looking statements and information are not guarantees of future performance. These risks, uncertainties and other factors include, but are not limited to: the satisfaction of the conditions to the proposed acquisition of TMX Group, failure to acquire Alpha Group or CDSL; the inability to successfully integrate TMX Group's operations with those of Alpha Group and CDSL, including, without limitation, incurring and/or experiencing unanticipated costs and/or delays or difficulties; future levels of revenues being lower than expected; conditions affecting the industry; local and global political and economic conditions; unforeseen fluctuations in trading volumes; competition from other exchanges or marketplaces, including alternative trading systems and new technologies, on a national and international basis; foreign exchange rate fluctuations and interest rate fluctuations (including from any potential credit rating decline); legal or regulatory developments and changes; the outcome of any litigation; the impact of any acquisitions or similar transactions; dependence on the economy of Canada; competitive products and pricing pressures; success of business and operating initiatives; failure to retain and attract qualified personnel; failure to implement strategies; dependence on information technology; dependence on adequate numbers of customers; risks associated with clearing operations; inability to protect intellectual property; the adverse effect of a systemic market event on the derivatives business; risks associated with integrating the operations, systems, and personnel of new acquisitions; dependence on market activity that cannot be controlled and/or conditions in the securities market that are less favourable than expected; and changes in the level of capital investment. Other factors could also cause actual results to differ materially from those in the forward-looking information.
Actual results, events, performances, achievements and developments are likely to differ, and may differ materially, from those expressed or implied by the forward-looking information contained in this document. Maple and its investors make no representations as to present or future value or the present or future trading price of any security, including Maple shares.
Given these risks and uncertainties, investors should not place undue reliance on forward-looking information as a prediction of actual results. Neither Maple nor its investors nor any of their respective affiliated companies undertakes any obligation to update or revise forward-looking information, whether as a result of new information, future events or otherwise, except to the extent legally required.