London Stock Exchange Group plc (“LSEG”) announced on 9 February 2011 an agreed all-share merger of equals with TMX Group Inc. (“TMX Group”) to create an international growth-focused transatlantic exchange leader. Today, LSEG is pleased to announce, together with its merger partner TMX Group, a proposed special cash dividend (the “Special Dividend”) for holders of LSEG shares and TMX Group shares and a revised progressive dividend policy for the merged business, LTMX Group plc (“LTMX”), both effective upon completion of the merger.
- Special Dividend of 84.1 pence per share for LSEG shareholders
- Special Dividend of C$4.00 per share for TMX Group shareholders
- Progressive dividend policy for LTMX, to be based off current TMX Group dividend
- Strong cash returns for both LSEG and TMX Group shareholders, while maintaining disciplined leverage
- Reflects the financial strength and flexibility of LTMX
- Demonstrates confidence in the substantial growth opportunities for LTMX
- TMX Group has reiterated its recommendation of the LSEG / TMX Group merger and rejection of the Maple proposal
Commenting on today’s announcement Chris Gibson-Smith, Chairman of LSEG and future deputy Chairman of LTMX, stated:
“This is great news for shareholders. This special dividend makes the LSEG / TMX Group merger even more compelling. Shareholders will benefit from cash upfront, plus the opportunity to participate in the ownership of an international exchange leader. Our new progressive dividend policy demonstrates our belief in the exciting growth opportunities and future for LTMX as an innovative and competitive international business.”
Xavier Rolet, Chief Executive Officer of LSEG and future Chief Executive Officer of LTMX, added:
“Both financially robust, both with enviable balance sheets, the merger of LSEG and TMX Group will create a low leverage, highly-flexible and ambitious merged business. The special dividend and our new dividend policy reflect the strong performance of our organisations and signal our absolute commitment to delivering both growth and shareholder value.”
LSEG’s shareholder circular (the “Circular”) and supplementary prospectus (the “Supplementary Prospectus”) relating to the Special Dividend and the proposed new dividend policy will shortly be published and will be posted to shareholders as appropriate.
The Special Dividend
LSEG shareholders will receive 84.1 pence per LSEG share and TMX Group shareholders will receive C$4.00 per TMX Group share, reflecting the merger ratio (being 2.9963 LSEG shares for each TMX Group share) for the merger. Based upon LSEG’s and TMX Group’s issued share capital as at 20 June 2011 and assuming an exchange rate of 1.5883, the total amount of the Special Dividend would be approximately £415.8 million (C$660.3 million). LSEG shareholders and TMX Group shareholders will only receive the Special Dividend if all of the conditions to the merger are satisfied or (where appropriate) waived and completion of the merger occurs. Completion of the merger is expected to occur in the autumn of 2011.
The record date, ex. entitlement date and the date of payment for the Special Dividend payable to LSEG shareholders will be announced by LSEG after all of the conditions to the merger (other than those which, by their terms, cannot be satisfied until completion of the merger) have been satisfied or (where appropriate) waived.
The Special Dividend is in addition to the pro-rated dividends which each of LSEG and TMX Group intend to pay to their respective shareholders in respect of the period from 31 March 2011 to completion, in the case of LSEG, and the period from the end of the last fiscal quarter prior to completion up to completion, in the case of TMX Group, in an amount in line with the relevant company’s existing dividend policy.
New Dividend Policy
In addition, LSEG and TMX Group have today announced agreement to change the LTMX dividend policy previously announced. Following completion of the merger, LTMX intends to establish a dividend policy that provides LTMX shareholders with an initial annual dividend per LTMX share that is at least equal to the current annual dividends per TMX Group share, divided by the merger ratio. Thereafter, LTMX intends to maintain a progressive dividend policy, as earnings and cash flows allow.
For the quarter ended 31 March 2011, TMX Group paid a dividend of C$0.40 per TMX Group share (equivalent to C$1.60 on an annualised basis). On an equivalent basis, using the merger ratio and assuming an exchange rate of 1.5883, the total LSEG dividends declared of 26.8 pence per LSEG share for the year ended 31 March 2011 would have increased to 33.6 pence per LSEG share.
Financing of the Special Dividend
LSEG and TMX Group intend to fund the proposed payment of the Special Dividend through a combination of cash held by members of their respective groups at the time of payment and existing committed facilities. LTMX’s pro forma net debt to EBITDA ratio as at 31 March 2011, after taking into account the Special Dividend, is approximately 1.4x.
LSEG has today entered into additional funding commitments with Barclays Capital and Morgan Stanley Senior Funding, Inc. (acting through itself or an affiliate thereof) for £100 million of short-term headroom facilities.
Superiority of LSEG / TMX Group Merger
The Board of TMX Group today reiterated its rejection of the Maple proposal and its continued recommendation of its merger of equals with LSEG.
The combination of LSEG and TMX Group will offer shareholders the opportunity to participate in:
- an international exchange leader strongly positioned for growth;
- the number one listings venue in the world by number of total listings;
- the number one global listings venue for natural resources, mining, energy and clean technology;
- a market leader in high-performance, cost-effective cash and derivatives trading technology;
- world-class markets in cash equities, derivatives, energy and cash fixed income; and
- a financially robust, low leverage transatlantic business, with global reach, international distribution, and a complementary portfolio of assets and services strategically positioned for further growth and expansion.
These opportunities are expected to create substantial value for shareholders and other stakeholders, with significant synergy benefits:
- revenue benefits of £35 million / C$56 million targeted by end of the third year following completion of the merger, rising to £100 million / C$160 million by the end of year five following completion of the merger. These revenue benefits will be derived from a variety of sources, including facilitation of new listings and admissions for customers, the wider availability of products and services via LTMX’s enhanced distribution and footprint and the development of new products; and
- cost synergies with an annual run-rate of £35 million / C$56 million are targeted by the end of the second year following completion of the merger.
In addition, LTMX will be committed to the long-term development of its business in Canada, the UK, Italy and internationally. The global business will provide scale and reach, actively managed from joint global headquarters in London and Toronto, supported by international centres of excellence. LTMX will be committed to the highest standards of market governance, the promotion of a diverse internationally regarded portfolio of brands and assets, local regulatory sovereignty and the promotion of career and job opportunities for the employees of LTMX.
LSEG believes that the Maple proposal in comparison to the LSEG / TMX Group merger is neither strategically nor financially compelling. Maple offers TMX Group shareholders insufficient detail on structure and value and lacks certainty of execution and delivery. Specifically, the Maple proposal does not contain valuations or financial projections in respect of the acquisitions of Alpha and CDS. There is, therefore, considerable uncertainty as to the valuation of the non-cash component of the Maple proposal. The Maple proposal also raises significant and serious competition law issues and LSEG does not believe that such issues can be effectively remedied. As a result, LSEG believes that Canada’s Commissioner of Competition would likely challenge the Maple proposal. Further, Maple would substantially increase the leverage of TMX Group to make it one of the most leveraged exchanges in the world.
Additional Information for Shareholders
Copies of the Circular and the Supplementary Prospectus will be available on LSEG’s website (http://www.londonstockexchangegroup.com/investor-relations/investor-relations.htm) and for inspection at the offices of Freshfields Bruckhaus Deringer, 65 Fleet Street, London EC4Y 1HT for a period from and including the date of publication of the relevant document up to and including admission of the Merged Group’s shares to trading on the Official List of the London Stock Exchange.
A copy of the Circular and the Supplementary Prospectus will also be submitted to the National Storage Mechanism and will shortly be available for inspection at: www.Hemscott.com/nsm.do
Instructions for shareholders on how to vote can be found in the Circular and additional information on the agreed merger can be found at www.ltmxgroup.com.
About London Stock Exchange Group plc:
London Stock Exchange Group plc sits at the heart of the world's financial community. LSEG operates a broad range of international equity, bond and derivatives markets, including the London Stock Exchange; Borsa Italiana; MTS, Europe's premier facilitator for the electronic fixed income market; and Turquoise, offering pan-European and US lit and dark equity trading. Through its markets, LSEG offers domestic and international businesses access to Europe's capital markets.
LSEG is a leading developer of high-performance trading platforms and capital markets software through MillenniumIT and also offers its customers around the world an extensive range of real-time and reference data products and market-leading post-trade services.
Headquartered in London and with significant operations in Italy and Sri Lanka, LSEG employs approximately 1,500 people worldwide. Further information on LSEG can be found at www.londonstockexchangegroup.com
