Canadian exchange operator TMX Group has entered into a takeover agreement with Sydney-based risk management software provider Razor Risk Technologies and will acquire all of the vendor’s issued shares. The offer is for CAD$.0349 ($.0343) per share, equivalent to a purchase price multiple of one times annual sales as of June 2011. Razor’s board has indicated that it will accept the offer, subject to its terms and conditions.
"The acquisition of Razor is exciting because it supports several areas of TMX Group's strategy and it provides a point of entry into the attractive risk management sector," says Brenda Hoffman, senior vice president, group head of information technology at TMX. "We are very pleased to be joining forces with the Razor employee team to offer our customers enhanced risk management services and products."
TMX's bid is indicative of how exchanges are expanding their clearing capabilities, particularly driven by incoming regulation regarding the over-the-counter (OTC) derivatives market. Under proposed rules in the Dodd–Frank Act in the US and Europe's review of the Markets in Financial Instruments Directive (Mifid II), standardized derivatives will need to be traded on-exchange, and centrally cleared. Razor specializes in clearing risk management, and counts large European clearinghouses on its client books.
The offer also comes at a time when the Canadian Commissioner of Competition has expressed serious concerns about threats to competition over the Maple Group's proposed takeover of TMX. These concerns rest primarily with equities trading, and clearing and settlement services, and TMX already owns a clearinghouse in the form of the Canadian Derivatives Clearing Corp. Maple has been the frontrunner since a proposed takeover bid for the group by the London Stock Exchange Group soured earlier this year.
In addition to TMX's problems, a technical fault on the Toronto Stock Exchange caused difficulties in trading yesterday, due to errors with stock symbols beginning with the letters M–Z.