Canada banks propose TMX deal to rival LSE bid

TORONTO (Reuters) - Canada's TMX Group, operator of the Toronto Stock Exchange, has received a takeover proposal from a group of Canadian banks and pension funds that could trump a friendly $3 billion bid from the London Stock Exchange.

TMX, in a statement on Saturday, did not say how much the financial institutions -- known as Maple Group Acquisition Corp -- were prepared to pay for the operator of Canada's largest equities market, only that the cash and equity proposal was above the current market price for TMX shares.

The Maple Group includes four of Canada's largest banks -- Toronto Dominion Bank, National Bank of Canada, Canadian Imperial Bank of Commerce and Bank of Nova Scotia -- and pension funds from the provinces of Ontario, Quebec and Alberta, a source with knowledge of the deal told Reuters.

Canada's two other largest banks, Bank of Montreal and Royal Bank of Canada, are advisers in the LSE-TMX deal and support it.

The LSE confirmed on Saturday it had been notified by the TMX of the rival approach from Maple Group, but said it remained committed to its merger with TMX.

A bid from the Maple Group, whose name invokes Canada's most patriotic symbol, the maple leaf, could represent a more palatable alternative to the LSE proposal for Canadian critics concerned about control of a national institution falling into foreign hands.

"Now Canadians have a Canadian alternative to look at that points to the strength of our financial services sector," said Ontario Finance Minister Dwight Duncan, an early opponent of London's takeover bid.

HIGHER BID

TMX Group stock closed at C$41.75 on Friday, valuing the company at about C$3.11 billion ($3.2 billion), higher than the LSE's all-stock offer. The Globe and Mail said on its website the Maple Group bid was worth C$48 a share, or some C$3.6 billion, compared with the LSE bid of about C$39.21 per share.

"If you have a strong cash bid, if you own stock and you're running a fund, the natural propensity is to take the money and run," said Thomas Caldwell, whose firm, Caldwell Securities, is a major shareholder in TMX Group.

"I'm not sure what their (London's) counter is, unless London says, 'Hey, forget about a stock deal, we can do cash,' but I'm not sure that London has that firepower."

The LSE offer is one of a number of proposed global exchange deals. Two bidders are courting NYSE Euronext, while Australia last month rejected an offer for its main exchange from the Singapore Exchange.

Alison Crosthwait, director of global trading strategy at Instinet, said the proposal from Maple Group would face the same regulatory hurdles as an LSE deal, but wrapped in the Canadian flag would likely have a better chance of getting through.

"I think Canadians like to own their own institutions and I think the government is going to be more comfortable with a Canadian deal," she said.

In addition to the Toronto Stock Exchange, Ontario-based TMX owns the TSX Venture Exchange for small-cap stocks and the Montreal Exchange for derivatives trading.

(Additional reporting by Chris Wickham in London; Editing by Frank McGurty and Peter Cooney)

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