TORONTO/LONDON (Reuters) – The London Stock Exchange's C$3.6 billion ($3.7 billion) plan to buy its Toronto counterpart collapsed on Wednesday in the face of a competing bid led by Canadian banks, leaving the UK exchange itself vulnerable to takeover.
The failure, which follows Singapore Exchange Ltd.'s scuttled bid for Australia's ASX Ltd, is the latest sign of nationalist pride frustrating cross-border deals for highly symbolic capital markets.
The failed bid from LSE opens the door to a hostile C$3.8 billion offer for TMX Group, operator of the Toronto Stock Exchange, from the Maple Group consortium. The consortium bid is a made-in-Canada alternative to a takeover that would have put a big domestic asset in foreign hands.
"This is a group of Canadians, businesses that came together and have asserted themselves," said Dwight Duncan, the province of Ontario's finance minister and an early opponent of the LSE deal.
In having to retreat from Canada, the LSE also draws attention to itself as a takeover target as exchanges consolidate to try to grow and broaden geographic reach, and to fight off rivals and new market entrants.
Nasdaq OMX Group, smarting from its own failure in the United States to buy New York Stock Exchange parent NYSE Euronext, could be a contender for an alternative transatlantic combination with the LSE.
"While the failed deal probably puts an end to TMX's M&A ambitions, other exchange operators will likely continue to look for partners. This reinforces my belief that we should expect more mergers, not less," said Ed Ditmire, New York-based analyst for Macquarie Securities.
Nasdaq and LSE shares rose in late trade on Wednesday, indicating that speculation about a tie-up could be brewing.
"It would not surprise me to see Nasdaq and LSE talking," said Jamie Selway, New York-based market structure expert and managing director of strategy at Investment Technology Group.
The TMX deal's collapse is a black eye for LSE Chief Executive Xavier Rolet, who banked his reputation on sealing the deal.
Rolet was to have led a LSE-TMX exchange group, which would have been a heavyweight global player and No. 1 in listing energy and mining companies.
But the support he got from TMX's management and board wasn't enough to overcome opposition from within Canada's tight-knit banking sector.
Four of the country's biggest banks were the lead players in the bid from Maple, a consortium that also included pension funds and financial services firms. Canada's other two big banks were advisers to the LSE proposal.
NOT ENOUGH VOTES
In brief statements issued one day before a shareholder vote, the two exchanges said they realized from an early tally of proxy votes that TMX shareholders would not give them the two-thirds majority needed to approve their friendly deal.
TMX Group said it would now review opportunities, including the Maple offer.
"LSE and TMX were both in positions where they weren't quite big enough or diverse and fast-growing enough to control their own destiny," said Justin Schack, managing director of market structure analysis at New York-based agency brokerage Rosenblatt Securities.
"They did the best deal that they probably could. Now that that's not going to happen TMX has Maple to deal with, while LSE is out on its own again, and there aren't many partners out there where they could be the acquirer rather than the target."
Maple has offered C$3.8 billion for TMX, mostly in cash.
LSE's mostly stock offer was worth about C$49 a share.
It would have needed a green light from a government that last year vetoed a big international takeover as not being in Canada's best interests.
TMX shares touched a high of C$44.80 after the deal was scrapped before easing back to close at C$44.20. That's well below the Maple offer price of C$50 a share.
Maple wants to wrap Alpha, Canada's biggest alternative trading venue, and the CDS stock-trading clearing system into a post-takeover TMX. That would give it a market share of more than 80 percent and leave it facing antitrust concerns.
"Now we need to see what the Competition Bureau thinks of Maple. We also need to see if shareholders support Maple. I think they will, I don't see how they won't," said Alison Crosthwait, director of global trading strategy at Instinet.
"We're going back to more of a closely held, interested parties controlling the exchange."
Canada's independent Competition Bureau has bared its teeth lately on several fronts, getting a C$10 million payment from BCE Inc's Bell Canada unit for misleading advertising, and seeking to block a joint venture between Air Canada and United Continental.
(Additional reporting by Claire Sibonney, Andrea Hopkins, Euan Rocha, Solarina Ho, Jonathan Spicer, Allison Martell and Trish Nixon; editing by Janet Guttsman and Peter Galloway)
Gold and other precious metals settled higher Wednesday after a drop below technical trading levels brought out buyers. Energy prices rose and grain prices were mixed.
A weakening of the dollar also pushed up the price of gold, which many investors see as an alternative to holding dollars. The dollar fell against the euro after Greece moved closer to securing new emergency loans needed to avoid a debt default. Greece's debt crisis has been weakening confidence in the euro.
Gold for August delivery rose $10.20 to settle at $1,510.40 an ounce Wednesday. July silver rose $1.112 to settle at $34.750 an ounce.
Buyers moved in this week after gold dipped below $1,500 and silver fell below $34. Analysts said many investors have been waiting for prices to get below those thresholds before buying.
Demand for gold and other precious metals remains strong, partly because of political wrangling that is holding up an agreement on raising the debt limit for the United States, said Carlos Sanchez, analyst with CPM Group in New York, a commodities research and consulting company. Gold prices tend to rise when investors expect disruptions in other financial markets, as would certainly be the case if the U.S. edged anywhere close to a default on its debt.
Sanchez said buying for gold and silver picked up this week after both metals fell to the lower end of their recent trading range, prompting investors who had been waiting to buy to make their move. Silver also fell to $34 in the middle of May, but then too buyers came out and pushed the price as high as $38 by May 31. Silver is still up 12.5 percent for the year.
July copper rose 11.75 cents to settle at $4.2095 a pound and October platinum rose $33.10 to $1,726.60 an ounce. September palladium rose $16.75 to $751.90 an ounce.
Agricultural prices were mixed. Corn for December delivery fell 2.5 cents to settle at $6.505. November soybeans rose 4 cents to $13.23 a bushel. September wheat rose 2.5 cents to $6.7425 bushel.
A government crop report due out Thursday is expected to show declines in the amount of farmland planted with corn and wheat.
Benchmark crude for August delivery rose $1.88 to settle at 94.77 per barrel on the New York Mercantile Exchange.
In other Nymex contracts, heating oil rose 9.32 cents to settle at $2.9347 per gallon, gasoline rose 11.93 cents to $2.9349 per gallon and natural gas fell 3.9 cents to $4.334 per 1,000 cubic feet.
HARTFORD, Conn. – Nearly three dozen states have rejected the idea of requiring sprinkler systems in homes by enacting legislation or rules that prohibit mandatory installation.
Home builders, still reeling from the recession, say requiring sprinklers would add to their costs. They have found allies in state legislatures and rule-making bodies that have turned aside arguments by fire safety officials that requiring sprinklers in homes save lives.
The National Association of Home Builders has not taken a position on state action banning mandatory fire sprinklers in homes, said program manager Steve Orlowski, but the group has argued that installing residential sprinklers should be up to homeowners.
Either through legislation or code, 34 states have prohibited mandatory residential fire sprinklers, Orlowski said. Only two states — California and Maryland — have adopted codes requiring installation of home sprinklers, he said.
In other states, sprinkler legislation died or is pending until next year, according to the National Conference of State Legislatures.
Connecticut, for example, is deferring action until next year. A measure requiring automatic fire extinguishing systems in one- and two-family homes failed to make it to a vote in the Public Safety and Security Committee.
Sen. Anthony Guglielmo, the committee's ranking Republican senator, said legislators did not have enough information about the cost to builders and municipalities that would enforce the law. Legislators will take up the issue next year only after hearing the recommendations of officials and others brought together by the state Department of Public Safety, he said.
The International Code Council, an organization of building inspectors, fire officials and others who set building standards, recommended in 2009 that states and municipalities adopt codes requiring sprinkler systems in homes and townhouses less than three stories high. The regulations took effect Jan. 1.
The National Fire Protection Association has said sprinklers will particularly help young children, the elderly and the disabled by giving them time to escape burning homes.
Opponents of requiring sprinklers cite their cost — and subsequent impact on home prices — and voters' dissatisfaction with government mandates.
In Missouri, lawmakers extended for eight years rules that require builders to offer sprinklers but do not mandate them.
"Our main concern, in this housing market, is that the requirement for mandatory fire sprinklers could cost $7,000 to $15,000 per home," said Missouri state Sen. Eric Schmitt, Republican chairman of the Jobs, Economic Development and Local Government Committee. "In this market, it's very difficult to justify."
In New Hampshire, Gov. John Lynch tried to vetoed legislation that prohibited local planning boards from requiring sprinkler systems in homes as a condition of approval for local permits. The decision about whether to require fire sprinklers should remain a local one, Lynch said.
Legislators overrode the veto.
Sen. John S. Barnes, Republican chairman of the Public Municipal Affairs Committee, said the override vote was not easy because he typically favors local control. But he does not believe any government body should be ordering homeowners to install fire sprinklers.
"If I buy or build a house, I think I should decide whether I put in a sprinkler system," he said.
John A. Viniello, president of the National Fire Sprinkler Association, said the process by which codes are approved is flawed. Codes regulating wiring, construction and other facets of home construction are informed by expert advice from industry and others, he said.
But when legislatures have a role in the process, codes too often are modified or scuttled, he said.
"Once the politicians get involved, it's over," he said.