The Maple Group boosted its hostile takeover offer for the operator of the Toronto Stock Exchange late Wednesday, firing back after rival suitor London Stock Exchange Group sweetened its offer for shareholders earlier in the day.
Maple Group Acquisition Corp. now says it will pay $50 per share for the TMX Group, up from the $48 per share it had previously offered.
Maple, a consortium of 13 Canadian pension funds, banks and financial services companies, said its new offer values the TMX at $3.8 billion.
The group said it is also increasing the number of shares to be purchased for cash to 80 per cent, instead of 70 per cent.
Maple boosted its offer hours after the TMX Group Inc. announced it will pay a special cash dividend of $4 per share when it closes its proposed friendly merger with the London Stock Exchange Group, sweetening the deal for shareholders of the Canadian stock market operator.
"The LSE proposes to return a bit of cash to shareholders but hasn't changed the fundamental value of its offer," Maple Group spokesman Luc Bertrand said in a statement late Wednesday.
Bertrand added that Maple is confident it would receive all required regulatory approvals, and is willing to pay a break fee to the TMX in case the approvals don't come.
"The LSE take-over continues to be conditional upon the willingness of regulators in Ontario and Quebec to abandon a key Canadian public interest protection limiting ownership of the TMX Group," Bertrand added.
Meanwhile, the TMX said Wednesday the combined company under the LSE deal will also pay a regular dividend after the merger that is at least equivalent to the current quarterly rate of 40 cents per TMX share.
The moves by the TMX and LSE are aimed at enticing shareholders to back the friendly merger, which has come under fire by some critics who argue it would put Canadian stock exchanges under the control of a foreign company.
TMX chief executive Thomas Kloet said the special payment and promises about future dividends came after talking to TMX shareholders who were concerned they would see their dividends go down after the merger.
"One of the comments that we have received from many of them is that they were concerned that we were maintaining the gross dividend rates that the two companies were paying," Kloet said.
"For TMX shareholders that would result in a reduction in their absolute dividend rate given that our dividend payout rate was higher than the LSE Group."
The TMX insists the merger with LSE would provide huge growth potential in a rapidly consolidating global stock market industry and is more attractive than a rival all-Canadian bid led by the banks and pension funds.
The move Wednesday brings the friendly merger's worth closer to the roughly $3.7-billion value of a rival hostile bid made by the Maple Group, a consortium of Canadian banks, pension funds, brokerages and insurers.
The TMX-LSE deal is valued at about $3.4 billion, based on the latest share prices, plus shareholders stand to receive an additional $300 million in the special dividend announced Wednesday.
In the new arrangement, LSE Group shareholders will also get about 84.1 pence —- about $1.32 Cdn per ordinary share — reflecting the merger ratio for the deal. The combined company, which is to be called LTMX, will pay out a total of about C$660 million to the shareholders of both companies.
Kloet declined to say how the merged company would finance the payment other than to say it would be less indebted than the resulting company under the Maple deal.
"We remain confident that what we're putting in front of our shareholders is a very compelling opportunity to fully participate -- without their shares being extinguished for cash -- in the growth and development of a global competitor," Kloet said.
For the Maple deal to go forward, TMX shareholders must vote down the proposed merger with the London Stock Exchange Group at a meeting on June 30.
The TMX-LSE merger also still needs regulatory approval from the federal government in the form of a review under the Investment Canada Act.
Under the Toronto-London merger deal, TMX shareholders will receive 2.9963 shares in the new company for each TMX share to give them a roughly 45 per cent stake in the merged stock exchange operator.
The proposed Maple deal offers to buy 70 per cent of TMX for $48 per share, plus a process that will see current TMX shareholders receive a 40 per cent stake in the new company in exchange for their remaining shares.
Maple investors would end up holding the remaining 60 per cent.
Maple is made up of Alberta Investment Management, Caisse de depot et placement du Quebec, Canada Pension Plan Investment Board, CIBC World Markets, Fonds de solidarite des travailleurs du Quebec, National Bank Financial, Ontario Teachers' Pension Plan Board, Scotia Capital, TD Securities, Desjardins Financial Group, Dundee Capital Markets, GMP Capital and Manulife Financial.
TMX shares, which were halted pending the announcement, were up 20 cents at $44 on the Toronto Stock Exchange.