The odds are stacked against the London Stock Exchange in its bid to take over the operator of Canada's biggest stock exchange, amid vocal endorsements for its made-in-Canada rival from investors, a billionaire activist and provincial politicians.
The LSE offer is worth C$3.6 billion, including a cash dividend to TMX Group shareholders. A rival offer from a bank-led Canadian consortium comes in at around C$3.8 billion.
Shareholders, some still hoping for a sweetened bid, vote on the LSE offer on Thursday.
I will not decide how I will vote until these guys are finished their games, Richard Fogler, President, Kingwest & Company, and a TMX shareholder, said last week after the two suitors raised their bids in quickfire succession.
A Reuters poll last week found that six of 11 TMX investors backed the Maple bid, three supported the LSE offer and two were undecided.
Maple, whose 13 members own some 6 percent of TMX shares, stresses national pride, and the need to keep a crucial domestic asset in Canadian hands.
The LSE, billing its proposal as a merger of equals, promises to create a transatlantic exchange that would be a powerhouse of mining and energy listings. LSE would have 55 percent of the new company, and TMX shareholders 45 percent.
It's essentially a grab that's gone slightly wrong, and they (LSE) can't add dollars onto a bid, because of course, they started this as a merger of equals, said Michael Smedley, chief executive of Morgan Meighen & Associates.
He said that the TMX, which supports the LSE offer, could delay the June 30 vote at any moment if it realizes it can't win the requisite two-thirds support.
TMX's board reiterated over the weekend it unanimously recommends the LSE offer and will proceed with the vote.
Maple has offered C$50 a share in cash and stock, while the mostly-stock LSE offer is worth around C$49 a share, including a C$4 cash dividend to TMX shareholders. There's also a one-off payout to shareholders of the LSE.
Chris Damas, an independent analyst and shareholder, calls the LSE bid value a little fictitious since the LSE share price could fall if investors approve the deal.
When I see people just pack the C$4 dividend onto the exchange rate price, I get a little nervous, because I really don't think you can create C$4 of value just by borrowing, he said. What really counts now is cash. I don't think people are buying into the vision as much as they'd hoped.
Both bids would face regulatory hurdles.
The LSE proposal needs the green light from provincial regulators, and from Canada's federal government, which last year unexpectedly blocked a bid for fertilizer giant Potash Corp, arguing it would not be in Canada's best interests.
Maple's offer will face anti-trust concerns. The 13-member consortium wants to wrap in Alpha, Canada's biggest alternative trading platform. Including Alpha, which is owned by many of the consortium's partner firms, it would have control of more than 80 percent of the market by value. Maple also plans to integrate the bank-run securities clearing house CDS.
Thomas Caldwell, a shareholder and chairman of Caldwell Securities, said Thursday's vote will be close.
Caldwell said he opposes the Maple bid because Maple members are some of the exchange's biggest traders already, and exchange fees have a direct impact on their own profits.
The conflicts are huge, he said.
But Montreal billionaire Stephen Jarislowsky, a vocal corporate governance champion and shareholder-rights activist, said Maple's diversity of shareholders would help allay fears that the powerful new grouping might boost listing and transaction fees.
Ontario's finance minister, Quebec's premier and Canada's main opposition leader have said they don't want the TMX to fall into foreign hands.
Proxy advisory firms ISS and Glass Lewis last week advised TMX shareholders to vote for the LSE bid.
(Editing by Janet Guttsman)