TSE gears up for a spring IPO
Board moves to lift ownership cap, stop member firms from selling shares early on grey market
Derek DeCloet, with files from Sinclair Stewart
Financial Post
Toronto Stock Exchange Inc. will complete its initial public offering in late spring or early summer, if there are no major regulatory problems and market conditions are acceptable.
The board of the TSE is also likely to raise, but not eliminate, the ownership cap that prevents any shareholder from owning for than 5% of the exchange, said a source familiar with the matter.
The new ownership cap would be at least 10% -- possibly 15%. The upper limit is being applied to Hydro One Inc., the power transmission company the Ontario government is taking public.
"It would be similar to Hydro One -- they're going to protect the company so it's not gobbled up, especially in the first few months," said the source, who requested anonymity.
Other stock exchanges have become embroiled in merger negotiations or have become takeover targets soon after going public. The latest example: Germany's Deutsche Boerse AG is planning a takeover bid for the London Stock Exchange, according to a report in The Daily Telegraph.
The TSE, led by chief executive Barbara Stymiest, will likely work out some of the details on its life as a public company at a board meeting this month, so it can report to shareholders at its annual meeting on May 28, the source said. The IPO was officially announced in May 2001; at the time, then-chairman Daniel Sullivan promised it would happen in six to 12 months.
The Hydro One sale is a factor in the equation of when the TSE finally lists on itself. The exchange does not want to do its offering too soon after the Hydro One deal for fear investors will be less enthusiastic.
Hydro One is expected to finish the largest IPO in Canadian history -- about $5-billion-- sometime this spring.
Scotia Capital Inc. and Goldman Sachs & Co. are the TSE's advisors on the IPO.
One issue that has not been resolved is exactly how the IPO will be structured.
The TSE, which earned $45-million, before unusual items, in the first three quarters of 2001, has ample cash and does not need to issue shares from treasury. But it is not clear how many of its shareholders will want to sell their shares in the offering.
Brokerage houses own almost all of the TSE. Each firm was given 20 shares for every seat it owned when the exchange became a for-profit company two years ago. (A few owned more than 5% at the time and were allowed to keep that much, though their voting power remains capped at 5%.)
In the meantime, the TSE board has acted to prevent shareholders from cashing out early by selling their TSE shares on the "grey market" before the IPO.
When the exchange demutualized in April 2000, it said no shareholder could sell his stake for two years, unless it got approval from the board. That prohibition was supposed to expire of Wednesday, April 3. But it has been extended until the public offering.
"What we're trying to do here is ensure that any proposed deal occurs in an orderly manner," said Steve Kee, a TSE spokesman.
Some people were worried that a few brokerage houses, desperate for the cash to keep their businesses going, would not wait for the IPO and would sell their shares privately for a low price. In theory, that would have depressed the value of the TSE months before its public debut.
"They're kind of telling us, 'Can't you wait?'" said a brokerage firm executive who controls a small block of TSE shares.
But even though some firms are facing tough times and need money, most will be content if the IPO happens before Canada Day, he said.
"I'd be happy if it was June," he said. "It's a real historic event, long awaited." |
