The London Stock Exchange
LSE Chief Executive Xavier Rolet said on Thursday Maple's C$3.6 billion ($3.7 billion) bid, which the company will take directly to TMX shareholders, failed to address questions about its funding and regulatory issues.
Maple's is a highly dubious construction where billion dollar questions remain unanswered, Rolet said.
The LSE chief said he remained optimistic about his own lower, agreed $3 billion TMX deal.
Goldman Sachs analyst Chris Turner said: In our view the Maple Group's rival bid for TMX Group leaves LSE with an uphill battle to convince both regulators and TMX Group shareholders that its offer is superior.
The hostile approach by the Maple group of Canadian banks, which hopes to galvanize simmering nationalistic opposition to a foreign takeover of the country's main exchange, leaves TMX investors holding the key to the LSE's long-term future.
Scooping up TMX is likely to make the LSE too large to be a realistic takeover target for rivals such as U.S. exchange Nasdaq OMX
A failure to buy TMX risks leaving the LSE a sitting duck as predators circle. Since Maple launched its rival bid on May 14, the LSE's shares have been rising steadily on the prospect that it could end up becoming a takeover target.
Rolet said on Thursday that TMX shareholders should ask how Maple would fund a purchase that includes the subsequent merger with Canadian trading platform Alpha and domestic clearer CDS.
Maple is already at three times leverage and if they pay cash for Alpha and CDS this will go much higher again, whereas if they pay stock, the banks stake in the merged entity goes over 50 percent -- which should be of concern to the regulators, he said.
TMX and LSE investors will vote on the deal on June 30.
TMX shareholders in Europe were not available for comment on Thursday.
Nasdaq also appealed directly to NYSE Euronext
History suggests that hostile takeovers don't work in the exchange sector whereas hostility seems to be pervading our industry of late, said Rolet.
We watched the recent hostile moves in the U.S. and there are some similarities with what Maple is trying to do here.
The Maple group of Canadian banks and pension funds can certainly bank on its local credentials helping soothe domestic political worries about foreign takeovers.
But some bankers say regulators may baulk at allowing four of the largest Canadian trading firms to take control of the flagship bourse because of vested interests.
LSE and TMX say a successful merger will yield 35 million pounds of annual revenue savings, rising to 100 million pounds in year five, although some analysts have questioned whether they can be achieved.
Maple countered on Wednesday that TMX senior management and staff would become part of a better-positioned company with its center of decision-making and headquarters in Canada.
The takeover battle also throws a spotlight on the commercial tensions that underpin the exchange operator market.
Some of TMX's largest customers, such as RBC Capital Markets
(Editing by Kirstin Ridley, Hans Peters and Erica Billingham)