Deutsche scraps takeover of LSE

SHARES in the London Stock Exchange fell 8% yesterday after Deutsche Boerse scrapped its £1.35 billion takeover proposal and fears grew that a rival suitor may also walk away.

The decision by Deutsche to bow to a shareholder rebellion gives Paris-based exchange Euronext a clear run to launch a formal bid for the LSE.

But LSE shares fell below 500p as the City questioned whether Euronext will be able to generate enough support for an offer, particularly as it shares many investors with its German rival.

Deutsche said its decision to withdraw its preliminary offer of at least 530p a share followed talks with its shareholders over the past month. It also cited the opposition of the LSE board which considered its offer to be too low.

It now planned to return a “significant” amount of cash to shareholders, but stressed that its bid could be resurrected if Euronext made a formal move.

Euronext - a combination of the Paris, Brussels, Amsterdam and Lisbon stock exchanges as well as the Liffe futures market in London - has remained tight-lipped on what it is willing to pay for the LSE but has outlined potential benefits.

It believes a tie-up could produce €203 million (£139.8 million) in annual cost savings and increased revenues.

Numis Securities analyst Justin Bates said yesterday’s statement meant it was now a “one-horse race” for the LSE and a maximum price of 555p a share would win.

Deutsche chief executive Werner Seifert said he was still convinced of the merits of bidding for the LSE.