Nasdaq launches £2.7bn hostile bid for London Stock Exchange

Nasdaq set its hostile takeover of the London Stock Exchange (LSE) in motion today when it posted its £2.7bn (€4bn) offer to shareholders.

The New York bourse gave LSE shareholders until January 11 to accept the 1243p a share offer which was turned down by the LSE board last month.

Nasdaq, which already owns 28.75% of the LSE after building up its stake gradually this year, decided to go straight to shareholders after the LSE board refused even to meet to discuss the offer.

Nasdaq said it will not improve its offer unless a rival bid is tabled or if it is agreed by the LSE board – unlikely given the LSE’s refusal to meet Nasdaq.

Treasury minister Ed Balls said yesterday that the Government would not block the takeover of the LSE, or any other UK firm, by foreign investors.

The release of the formal offer document today comes two years after the latest round of takeover approaches for the LSE began.

On December 13 2004, Deutsche Boerse said it was interested in making an offer of 530p a share, or £1.35bn (€2bn), but it was knocked back by the LSE.

Since then the LSE has faced interest from Euronext, the New York Stock Exchange (NYSE), Australian bank Macquarie and Nasdaq, which had a £2.4bn (€3.6bn) offer turned down in March.

The LSE has seen its value rocket in the last two years, with shares lifting from 414p before the approach from Deutsche Boerse to 1320p today, giving it a market value to £2.8bn (€4.1bn).

LSE chief executive Clara Furse has consistently told suitors that their offers undervalue the company.

Following last month’s £2.7bn (€4bn) bid from Nasdaq, she said: “We believe Nasdaq’s final offer fails to recognise the outstanding growth record and prospects of our group on a standalone basis, let alone the Exchange’s unique global position.”

The LSE pointed to record first half profits and the success of its new electronic order book Sets.

A combination with Nasdaq would create the world’s largest equity market by listings made up of more than 6,400 quoted companies with a total market capitalisation of £6.3 trillion (€9.3 trillion).

Financial markets in the US and Europe are under pressure to consolidate to create cross-border trading opportunities.

The NYSE is favourite to land Paris-based Euronext and a tie-up between Nasdaq and the LSE is seen by analysts as an obvious step.

The pressure to secure a deal increased last month when seven investment banks, including Goldman Sachs and Citigroup, unveiled plans for a rival European platform of their own to challenge the likes of the LSE.