LSE repulses the NASDAQ Bid

In its failed but audacious proposition to create the first major transatlantic stock exchange company, The London Stock Exchange, Europe’s biggest stock market, announced that it had received and rejected a $4.2 billion (2.43 billion pounds) informal cash offer from NASDAQ, an indication that the arms race among the world’s leading exchanges is escalating.

The U.S.-based NASDAQ confirmed the offer and appeared unwilling to walk away. The LSE, which recently batted away a much lower bid from Australia’s Macquarie Bank, said Friday the NASDAQ proposal of 950 pence ($16.50) per share cash offer undervalued the exchange, which is Europe’s oldest and values the biggest equity market in Europe.

The NASDAQ argued the offer would transform the two exchanges into one trans-Atlantic marketplace that could trade both European- and U.S.-listed stocks equally throughout business days on both sides of the ocean.

LSE shares rose 1.9 percent to close at 880 pence ($15.29) on Friday, while NASDAQ shares jumped $4.06, or 10 percent, to $43.56.

The NASDAQ said the price represented a 72 percent premium to the closing price on Aug. 12, 2005 -- the business day before Macquarie’s announcement. The proposal is well above the 580 pence ($10.08) per share offer by Macquarie, Australia’s largest investment bank. The pan European exchange owner Euro next and Germany’s Deutsche Bourse also showed interest in the exchange.

The LSE said the bid by NASDAQ, which trades technology shares, represented only an 8% premium when compared with the LSE’s closing share price on Friday of 880 pence.

This was the third bid received by the LSE in 15 months and its rejection of NASDAQ’s offer fueled speculation it might not be the last, with the New York Stock Exchange - the world’s largest stock exchange and NASDAQ’s arch rival - rumored as a potential buyer.

NASDAQ, the No. 2 U.S. stock exchange, said it would seek "constructive discussions" with the board of the London exchange with the aim of reaching a recommended offer for shareholders. It expressed confidence that it would announce a transaction in the near term.
The move comes amid ongoing global consolidation among securities exchanges, with European exchanges circling each other in vain for well over a year as the pressure intensifies from users to cut costs and fees.