A Canadian consortium of banks and pension funds said late on Wednesday it raised its hostile bid to buy the operator of the Toronto Stock Exchange, just hours after the London Stock Exchange sweetened its friendly bid to some $4.1 billion.

The so-called Maple Group said it raised its cash and stock offer for TMX Group to C$50 a share from C$48. It also plans to increase the number of TMX shares to be purchased for cash under the offer from 70 percent to a maximum of 80 percent. It said the total value of its bid was C$3.8 billion ($3.9 billion).

The increased cash purchase price will be funded entirely by additional proportionate equity investments by Maple investors, it said.

TMX Group shareholders must understand that if the LSE take-over proceeds, the opportunity to consider our superior offer will be lost. The only choice for shareholders who want to preserve the ability to consider our superior offer is to vote against the LSE take-over, Maple Group spokesman Luc Bertrand said in a statement.

The London Stock Exchange added cash payouts to its friendly bid for TMX Group earlier on Wednesday, topping Maple's earlier bid, valued at $3.8 billion.

Just a week before TMX Group shareholders vote on its proposal, the LSE added some C$660 million ($680 million) to its bid in the form of special dividends of C$4 per TMX share and 84.1 pence per ordinary share of the LSE, in an effort to woo shareholders from both companies.

Alison Crosthwait, director of global trading strategy at Instinet, which operates Chi-X, Canada's second-largest alternative trading system, valued the new LSE proposal at C$48.94 a share.

TMX stock, halted pending the announcement, rose about 1 percent to close at C$44.25, even as some shareholders questioned if the new LSE offer was high enough.

I think it's inadequate, Richard Fogler, a shareholder and president of investment firm Kingwest & Co said shortly after the announcement. The LSE, by raising the bid, they've basically publicly stated that they don't have the votes to win.

TMX said it was sticking to plans for a shareholder vote on the LSE offer on June 30, putting pressure on Maple to react as it did just hours later.

This is a close-run deal, Thomas Caldwell, whose firm Caldwell Securities holds TMX shares, said earlier in the day.

Earlier on Wednesday TMX formally rejected the initial bid from Maple. It said Maple failed to provide proof that its C$48-a-share offer was superior and the bid would result in significantly increased leverage for the exchange operator. TMX officials could not immediately be reached to comment on the revised bid.

TMX Chief Executive Tom Kloet said in an interview earlier in the day that the LSE's decision to sweeten the friendly bid showed the companies' confidence in the deal and reflected discussions with TMX shareholders.

I thought we should show the confidence we feel in the combined businesses, he said, calling the dividend rate change the right thing to do.


Under the London offer, TMX shareholders will receive 2.9963 LSE Group shares for each TMX share, leaving LSE shareholders with control of 55 percent of the new company. and TMX shareholders with 45 percent.

Some shareholders said the promise of special dividends just gives away future value.

The special dividend looks nice but ... it's really borrowing from Paul to pay Peter, said Chris Damas, an independent analyst and TMX shareholder who plans to vote against the LSE proposal.

A London banker who advises financial services companies but is not involved in the deal described the move as classic M&A, and predicted LSE shares would open lower on Thursday.

LSE shares closed the day flat in London, at 957.35 pence.

Both takeover proposals will face regulatory hurdles.

The LSE offer needs approval from provincial regulators and from federal Industry Minister Christian Paradis, who must determine if the offer is of net benefit to Canada.

The LSE and TMX say they plan to create a transatlantic partnership with a strong position in mining and resource firms. Opponents say it puts a crucial Canadian asset in foreign hands.

The Maple deal, billed as a made-in-Canada solution, would have to pass anti-trust muster because its combination would give the new firm control of more than 80 percent of Canadian stock trades.

($1=$0.97 Canadian)

(With additional reporting by Andrea Hopkins, Solarina Ho, Euan Rocha and Victoria Howley; editing by Jeffrey Hodgson)