April 30, 2012 Comments

The TMX Group appears to be moving closer to an acquisition by the Maple Acquisition Group.

They had a press release on Friday afternoon at 1:43 pm which although a bit cryptic seemed to indicate takeover was progressing and that the Competition bureau concerns might be overcome. The stock shot up about 5.5% on that news. (This was material news released by a company and in my opinion there should have been a trading halt. I have filed a complaint with the regulator about this). Today Monday, after the close, the TMX and Maple released further information which again seems to indicate the acquisition may proceed (although hurdles remain).

Monday’s press release indicated that Maple would acquire 70 to 80% of the TMX shares at $50. The market has at least until not not been totally convinced that the sale would happen. The shares had been $42.75 on Friday before the afternoon press release an closed today at $45.10. As I said below on February 26, it may have been a reasonable speculative pick at around $42 (and that is possibly true¬† even at the $45, but I will not be buying any). It will likely rise tomorrow so I suppose the time to buy may have passed. If it is bought for $50, I believe one option will be to take the maximum possible shares int eh new entity rather than cash. And the new TMX / Alpha should continue to be a big money-maker.

I have been skeptical that the Competition Bureau would allow this transaction. To my mind the TMX itself is pretty close to a monopoly and I am don’t think it ever should have been allowed to operate as an unregulated-as-to-price monopoly. And it beggars belief to think that the competition Bureau can now allow it to combine under common ownership with its main competitor which is an alternative exchange called Alpha. (What are they going to do? make a rule that the two exchanges will still compete despite common ownership?) But the parties to this take-over seem to think it will go ahead although they also seem to indicate that they may not know before the end of July. So no one should hold their breath expecting a rapid payout of any $50 amount per share from Maple.

In the next couple of weeks we should get earnings releases from some of our higher rated companies. I am eager in particular to see the results for Melcor (should be strong but I am not sure about the outlook), Canadian Tire and Walmart.