Canada is one of the world's most sought after markets, places to live, and commodity-rich investment opportunities. And I say "one of" because I am well aware of other, burgeoning commodity markets that are attracting great attention. Additionally, we were not the only country that made it through the financial crisis relatively unscathed. According to a speech made by Paul Volcker, Australia didn't do too badly either.
So, now that Canada has lost its chance to be globally connected through the LSEG, let's be realistic about the impending (or not) Maple Group takeover, shall we? Putting aside all of the challenges the individual institutions bring to the table right now, there are three possible scenarios being talked about on The Street:
First, Maple Group may want to adopt a strategy that would be to realize cost savings and efficiencies with their own companies by converting the TMX back into a utility. This could include lowering marketing data, listing and trading fees and restructuring TMX Group to act as support for the businesses, rather than its own entity.
Second, a second scenario would be if the goal of Maple Group (MG) was simply to stop the merger TMX/LSEG merger -- there will be a point in time throughout the course of their discussions that MG will simply walk away. MG has already extended their bid on the TMX in an attempt to give shareholders enough time to make a decision on the proposed takeover of TMX group (an extension remains unconfirmed by MG).
The reasoning behind an extension is that the Competition Bureau/Provincial regulators have to sanction the deal in order for it to go through -- if the proposed merger deal expires before the Competition Bureau/Provincial regulators give their approval, then the deal will be incomplete as a Shareholder approval is not a Regulatory or Government approval. Maple may be waiting to see whether or not full regulatory approval will come through before the offer expires.
And thirdly, one never knows if perhaps Maple Group has a spectacularly creative growth strategy as part of the deal. Perhaps they will turn the TMX into an Exchange that can afford to purchase larger Exchanges?
The reality is TMX Group's publicly available float drops down to 40 percent. Obtaining the Exchange's stock will become more challenging due to liquidity challenges. The terms of the deal have specified that there would be a gradual withdrawal of ownership of the Exchange by Maple Group's owners and we would once more be participants in a monopoly. The TMX Group and Alpha put together will account for over 80% of the volume executed in Canada. Is it a good thing? Likely not for competition as it seems to be slowly and effectively eliminated.
In each scenario, Maple Group owning the TMX is a protectionist movement. Canada is a socialist country with an oligopoly that runs the market. This is not news. All of the parties involved believe they are protecting their best interest, which begs the questions, is their best interest Canada's best interest? Shall we remain an island? Build a border around our country?
Canada cannot take on the global markets by itself. In my opinion, we should be working with and strategizing with other markets to create a functional, reliable and profitable global economy.
Renee Colyer is CEO of Forefactor, the market research firm based in Toronto.