TMX/Maple: a massively challenging deal

Sharon Geraghty

The TMX/Maple saga, and the original LSE deal that started it all but never happened, is finally coming to an end with this week’s announcement that Maple Group Corp.’s takeover of TMX Group Inc. met the final conditions of the deal. Although a few elements,  like acquisition of the remaining shares in the conversion, have yet to take place, the uncertainties created by having such significant regulatory requirements and such a large group of investors working together, are now gone. The deal is essentially done.

Lexpert spoke with two lawyers who worked on the deal about the significance of the deal, and what lies ahead.

Sharon Geraghty of Torys LLP, who represented TMX Group throughout the process, says this is probably the most challenging transaction she has done from a regulatory perspective:

There were quite a few [transactions involving stock exchanges] that had been attempted globally that had not succeeded…We all knew we could do it but when it actually got done it was a bit ‘wow’, we actually got there.

Geraghty was also impressed with how such a large consortium of financial institutions, which included the 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.), National Bank Financial & Co. Inc., Ontario Teachers’ Pension Plan, Scotia Capital Inc., TD Securities Inc. and The Manufacturers Life Insurance Company,  stuck it out:

That consortium was the most prominent financial institutions in the country who worked together extremely well actually. I was amazed at how well they were able to work together because it was very difficult.

John Bodrug of Davies Ward Phillips & Vineberg LLP, who represented the Maple consortium, was also impressed with all of these institutions worked together:

You had 13 investors and all of them are very sophisticated and used to running transactions on their own. What I found remarkable to be involved in was to see the degree of collaboration that continued throughout that piece.

Yet optimism about “everyone working together” was not uniform throughout the process. As The Globe and Mail reported in April of this year:

Over the past year, Maple’s plan has exacted a steep toll, in cash to pay the legions of lawyers and in time as senior staff at the members of Maple have devoted thousands of hours to the plan. There are weekly teleconferences and daily updates. Yet the Competition Bureau in particular remains a hurdle, sources say.

As a result, when asked to rate the odds of the transaction actually succeeding, some who are familiar with the situation say the chances are 50-50, at best. Given that, there are those in the group considering walking away now.

However, there is also a common refrain among those who spoke about the deal: Though the takeover’s slow pace is exasperating and its prospects uncertain, nobody wants to be the one to kill it. Maple’s members are aware that backing out would tar their reputations as deal makers, so even for pessimists there is an argument for at least one more extension of the pact.

“No one wants to be the one that pulls the plug,” said a person familiar with the situation. All of the people spoke on condition of anonymity because the talks are private.

Geraghty seems positive about the regulators role now, which is no doubt easier now that the deal is done:

The regulators did their job, they did a good job, they ensured that even though there was this very prominent group and a lot of pressure, they really did not bend and they made sure that they got the protections they needed. So, it was definitely a long process.

Ultimately, the approval of the competition bureau came fairly soon after the Ontario Securities Commission published recognition orders in early July that allayed the bureau’s concerns. That was when things essentially fell into place, says Geraghty:

That is when we recognized we could make the July 31 date (that was when the bid was expiring). It didn’t look for sure we could make that date until that happened and then it was just a bit of a race to the takeup.

And what does this deal mean for Canada, its financial markets, and ultimately, for Canadian business law firms?

Bodrug is optimistic:

I would anticipate that Maple/TMX will be out there looking for international transactions and trying to grow their international presence. I think that will be a good thing and enhance the financial [strength of Canada], and Toronto as an international financial centre. I think that to the extent that this transaction does enhance Toronto as an international financial centre, that is a good thing for Canadian law firms and investment bankers.

And although Geraghty thinks there would have been many positives to the “LSE deal that never was” as well, she thinks the all-Canadian nature of this deal means that Canadian law firms will benefit:

Any time you see a Canadian organization stay in Canada and grow stronger, usually it is very good for Canadian law firms. Their office is here, it is a larger business and it has plans to grow. I think that is only good for Canadian law firms. If we had done the London deal, the company would have been a public company listed in the UK, it would have been listed here, but it would have had its head office there. It would have had the finance group here, which is a good source of legal work, but the CEO was going to be resident in London. Here we have of all that business still here in Canada.There is no cloud over this deal, in that sense, because it is all staying in Canada.

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