Mixed reaction as Cdn banks and pension funds put in $3.6 billion bid for TMX Group

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``This will be a protracted battle, they'll wring some concessions out of LSE to get it done,'' he said. ``You'll be hearing about exchanges linking up for decades, that's just the way of the world. The small, regional exchanges' days are numbered.''

If the Maple Group deal succeeds however, existing shareholders of TMX Group would own 40 per cent of Maple's shares, the pension fund investors would hold 35 per cent and the bank-owned investment dealers about 25 per cent. Moreover, no shareholder of Maple would own more than 10 per cent of Maple's total shares, consistent with existing regulations.

``We believe there is an opportunity to create significant value by capitalizing on TMX's strengths to build a stronger integrated exchange and clearing group _ and by doing so, to secure the future growth and ongoing integrity of the Canadian capital markets,'' Luc Bertrand, vice-chairman of National Bank Financial, said in a release.

``We believe our offer constitutes a superior proposal under which shareholders would receive cash, plus the opportunity to continue to participate in the company's ongoing growth.''

Observers who favour the Maple bid, say it would hopefully mean fewer jobs migrating across the Atlantic and fewer concerns of foreign dominance.

``You're seeing a very confident financial system in Canada is making a bid to buy the TSX, merge it with their own exchange Alpha and look for international opportunities,'' said John O'Connell, CEO of Davis-Rea investment management, who added that the Maple group could choose to partner with exchanges in emerging markets like those in India or Hong Kong in the future.

In response to concerns over certain big banks having too much control in the deal, O'Connell said the institutions already held considerable sway in Canada's financial markets.

``I don't see it making a material difference of the Canadian landscape,'' he said, adding that Canadians would continue to have the ability to trade on the New York Stock Exchange.

Ontario Finance Minister Dwight Duncan, who was concerned a merger with the LSE would leave Canada's biggest stock exchange dominated by foreign interests, welcomed the new bid.

``I applaud them, I think they're also Canadian patriots,'' he said in a phone interview Saturday. ``I think they recognize how important our financial services is to a brighter future for Canada.''

Federal finance minister Jim Flaherty has been briefed on the proposal but did not provide any comment when asked.

Meanwhile, there are those who want to wait for more details before supporting either bid.

``I know the banks are really looking to maintain control of the exchange but they're going to have a lot of work to do in terms of showing they can provide as much value to shareholders as the LSE bid can,'' said Alison Crosthwait, director of global trading research at institutional broker Instinet.

``I worry that with the banks controlling them that they will not evolve as quickly and with as much innovation as you might see if they had to compete globally by merging with the LSE.''

Crosthwait added that she hoped the Maple group would reveal more details about who new management would answer to and what their goals would be.

Maple Group has said a compelling part of its plan is the proposed combination of TMX Group with Alpha Group and CDS to create an integrated trading and clearing exchange for equities, bonds, energy products and derivatives in both exchange-traded and over-the-counter markets.

The bidder said ``this proven and highly-valued business model, which currently exists at Deutsche Bvrse, Hong Kong Exchanges and Clearing and the Australian Securities Exchange, would dramatically broaden TMX Group's business activities, generate substantial growth opportunities, and create significant synergies (including cost rationalization) all for the benefit of TMX Group, its shareholders and Canada's standing as a global financial centre of excellence.''

Alpha Group was set up in 2007 by BMO Nesbitt Burns, Canaccord Capital, CIBC World Markets, the CPP Investment Board, Desjardins Securities, National Bank Financial, RBC Dominion Securities, Scotia Capital and TD Securities.

CDS , the Canadian clearing and depository firm, is two thirds owned by BMO, ScotiaBank, TD Bank, National Bank, CIBC, and RBC, the Investment Industry Regulatory Organization of Canada, with just over 15 per cent, and TMX Group with about 18 per cent.

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