The owners of the Toronto Stock Exchange have agreed with the London Stock Exchange Group plc. to terminate their $3.7 billion merger agreement.

Based on proxies filed by TMX Group Inc. shareholders as of Tuesday’s deadline, the merger was unlikely to receive the two-thirds majority required to proceed, the TMX and LSEG said in separate statements Wednesday.

The termination is a victory for rival TMX bidder, Maple Group Acquisition Corp., a bank-led consortium that argued Canada’s financial interests were better served by a Canadian owned stock exchange.

The TMX said it would now focus its energies on pursuing other growth objectives and would review Maple Group’s offer.

“The TMX Group management and board believe that the TMX-LSEG merger would accelerate our business strategy and create shareholder value, while enhancing the performance of Canada’s capital markets,” TMX Group CEO Tom Kloet said.

“Although we will not join forces with LSEG, our business is strong and I have enormous confidence in the continued success of our company.”

In terminating the merger agreement, TMX Group has agreed to pay a $10 million expense fee to LSEG, as well as a further $29 million fee to LSEG if the deal with Maple Group is consummated within certain time limits.

“We are clearly disappointed that, despite a majority of both LSEG and TMX Group shareholders voting for our recommended merger, the two-thirds approval threshold for TMX Group shareholders was not met and hence the merger will now not proceed,” said Xavier Rolet, chief executive officer of the LSEG.

“We believe the merger would have been a unique opportunity for TMX Group shareholders to be partners in a truly international group, co-located in Toronto and London, focused on growth and opportunity,” Rolet said.

He said LSEG will continue to pursue other growth opportunities.

The announcement comes a day before TMX shareholders were scheduled to vote on the merger at the company’s annual general meeting in Toronto.

It also paves the way for Maple Group to continue wooing TMX shareholders to its rival offer. The bid by the bank-led consortium was conditional on TMX shareholders rejecting the London merger.

Maple Group says its bid is worth $50 per share, including $40 in cash, which it said was superior to the merger with London. The TMX and LSEG valued their all stock merger at $49 a share, including a special $4 cash dividend.

TMX shareholders have until Aug. 8 to tender their shares to Maple Group’s offer.

Maple Group had lobbied TMX shareholders hard in recent weeks, as had the owners of Toronto’s and London’s stock exchanges, which suggested the outcome of Thursday’s vote was too close to call.

Both the London merger and Maple Group bid would have to clear regulatory hurdles.

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The announcement comes nearly five months after the TMX and LSEG first announced their merger plans on Feb. 9.

Maple Group announced it plans to mount a rival offer in mid-May. However, the TMX board continued to defend the LSEG proposal.

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