Nasdaq drops £2.4bn bid for LSE, but leaves room for tie-up
March 31, 2006
By Mark Potter and Louise Heavens
London - Nasdaq Stock Market yesterday dropped its £2.4 billion (R26.3 billion) proposed offer for the London Stock Exchange (LSE), becoming the fourth suitor in a year to abandon pursuit of Europe's biggest stock market.
But the second-biggest US stock exchange operator left the door open to a tie-up in future.
At noon yesterday LSE shares were down 8.6 percent at £10.24, valuing the exchange at about £2.8 billion.
But they remained well above Nasdaq's cash offer proposal of £9.50 as analysts continued to believe the LSE might eventually succumb to a bid or take a more active role in the industry's consolidation.
"Over the long term, some form of consolidation seems very likely," said Andrew Mitchell at Fox-Pitt Kelton.
Michael Long, an analyst at Keefe, Bruyette & Woods, said the London-based exchange might look towards a tie-up with Nordic exchange operator, OMX, another former suitor. "LSE would not only look to increase its size, but also revenue diversity."
An industry source said Nasdaq was deterred by a big rise in the LSE's share price since its proposal was made, and rejected, earlier this month.
LSE shares soared to as high as £12.195 since Nasdaq's approach was unveiled on hopes Nasdaq might improve its proposal or that a rival suitor might enter the fray.
The LSE is viewed as a bid target because it offers a large pool of market liquidity and is also more digestible than rivals, because it has not diversified into other areas.
The LSE declined to comment on Nasdaq's decision to abandon a bid. "Business continues to go from strength to strength," a spokesperson said.
In February the LSE repelled a £5.80 a share bid from Australia's Macquarie Bank. Deutsche Börse withdrew a proposed offer in March last year and transnational European exchange Euronext has also in the past expressed interest in making a bid.
Meanwhile, the LSE has pledged to return £510 million to shareholders in its bid to remain independent.
Nasdaq said that if it made an offer in more than three months' time, it reserved the right to do so at a price of less than £9.50 a share. - Reuters
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