TMX Group net income down 97% in Q2 on costs related to Maple Group takeover

TORONTO – TMX Group says it expects to begin its “next chapter” in the coming days after reporting a 97 per cent drop in net income as it booked costs associated with Maple Group’s proposed acquisition of the operator of Canada’s largest stock exchange.

“These are the costs associated with successfully reaching the finish line with Maple, which we expect to do on July 31,” said CEO Tom Kloet during a conference call Friday.

“I am very excited about the future prospects for the new TMX Group and look forward to the next chapter.”

The company says its already working on integration plans for the anticipated takeover of Alpha and the Canadian Depository for Securities, which is to take place immediately after Maple acquires the TMX.

TMX posted net income of $1.8 million in the second quarter, or two cents per share, compared to net income of $54.7 million, or 73 cents a share, in the same period a year ago.

Revenue in the quarter totalled $167.5 million, down slightly from $169.3 million in the year-before quarter.

On an adjusted basis, TMX reported earnings per share of 81 cents for the quarter, down 14 per cent year over year but beating analyst expectations.

Analysts on average, had been expecting earnings of 74 cents per share on $161 million in revenue, according to Thomson Analytics.

TMX Group says the drop in net income was largely due to $54.4 million in costs related to the proposed Maple Group acquisition, and also a failed attempt to merge with the London Stock Exchange.

The company says lower equities trading volumes — which also hurt profits — reflect the weakened global economy, which has hurt investor and public company confidence.

“Our operating statistics in quarter two continue to reflect the impact of global economic uncertainty,” said Kloet. “It has been a difficult market.”

Maple Group, a consortium of 12 financial institutions, is poised to complete its $3.8-billion takeover of the Toronto Stock Exchange if enough shareholders tender their shares to the offer by the end of this month.

Maple announced earlier this month that Kloet will remain in charge of the company that runs the Toronto Stock Exchange and will be named CEO of Maple if the deal moves forward.

The consortium of Canadian banks, pension funds and investment firms cleared its last major regulatory hurdles when securities regulators in B.C. and Alberta signed off on the takeover earlier this month.

Maple said it has agreed to the terms of the final recognition orders, which focused on the TSX Venture Exchange and the Natural Gas Exchange.

Regulators in Ontario and Quebec, as well as the federal Competition Bureau, approved the deal earlier this year.

Analysts said with the regulatory approvals out of the way, they are confident that shareholders will allow the deal to move ahead.

TMX Group shareholders have until July 31 to tender their shares to the Maple offer.

The TMX board had originally supported a merger proposal with the London Stock Exchange Group and dismissed the Maple Group offer over a number of debt, competition and regulatory concerns.

But after the LSE deal failed to gain enough shareholder support in the face of the richer Maple bid this summer, the board turned its attention to the Maple offer.