The London Stock Exchange Group (LSEG) has withdrawn from its prospective merger with TMX Group on grounds that it did not expect to secure sufficient support at the Canadian exchange's group shareholder meeting.
While a majority of TMX shareholders were expected to vote in favour of the merger plan, LSEG said it was “highly unlikely” to achieve the required two-thirds majority approval at tomorrow's shareholder meeting, based on proxy information already received.
The move leaves the LSEG open as a potential takeover target, with Nasdaq OMX, which recently failed in its own bid for NYSE Euronext, cited by recent press reports as a possible bidder.
“We are clearly disappointed that, despite a majority of both LSEG and TMX Group shareholders voting for our recommended merger, the two-thirds approval threshold for TMX Group shareholders was not met and hence the merger will now not proceed,” said LSEG CEO Xavier Rolet. “We remain committed to delivering shareholder value and we are looking forward to the future with confidence, momentum and a clear strategic path for building on our successes to date.”
LSEG and TMX Group initially agreed to merge in February 2011 in a deal that would create an exchange group with a combined value of Â£4.3 billion. The combined exchange group, described as a “merger of equals” by the two firms at the time, aimed to become a listings powerhouse in natural resources, mining, energy and clean technology companies.
The LSEG's bid was countered in May by the Maple Group, a consortium of 13 Canadian financial services firms, which placed its own bid of C$3.6 billion (Â£2.3 million) for TMX.
Maple intended to integrate TMX's existing businesses with Alpha Group, a Canadian alternative trading system, and CDS Clearing and Depository Services, Canada’s national securities depository. It also asserted that its proposed transaction would preserve Canadian governance, decision-making and regulatory oversight.
TMX Group will pay an expense fee of C$10 million (Â£6.4 million) to LSEG, as per the original merger agreement that was signed in February 2011. Furthermore, if TMX Group, or one or more of its subsidiaries, reaches a deal with Maple Group within the next 12 months, the Canadian exchange will pay a further C$29 million (Â£18.59 million) to LSEG.
A statement from the TMX said it would “continue to pursue its growth objectives” including the offer from Maple.