14 March 2006

The Guardian: Open talks with bidders, shareholders tell LSE

Top investors in the London Stock Exchange made clear yesterday that they wanted chief executive Clara Furse to open talks with any suitor willing to offer a bid close to the current market price.

Shares in the LSE soared more than 30%, closing up 269p at £11.49 as the City predicted that the New York Stock Exchange and others would join the chase for Europe's biggest stock market.

The LSE rejected a 950p-a-share takeover approach worth £2.4bn from the technology-biased Nasdaq late on Friday, saying it 'substantially undervalued' a company holding a unique position.

But Threadneedle Investments, which holds a 13% stake in the London exchange, issued an early public statement yesterday which in effect called on the LSE to start talking to all potential suitors.

'As the LSE's largest shareholder, we have consistently encouraged the board of the LSE to take a bold and steadfast view of its future and, should independence no longer be tenable, to maximise the value of its unique franchise,' said Michael Taylor, Threadneedle's head of equities. 'Commentators generally are now belatedly beginning to recognise the value of this business, likewise the market's valuation is beginning to reflect current realities. We are now willing to discuss proposals with interested parties.'

Threadneedle's statement followed an equally encouraging message to the LSE's rivals from another of its major shareholders, Scottish Widows, which was reported over the weekend.

Nasdaq said it was delighted by these signals which left it in no doubt that a tie-up at the right price would be welcomed by investors and it called on the LSE to hold talks.

'We regard Threadneedle's statement as a very constructive event and we continue to reach out to both the board [of the LSE] and shareholders because we continue to believe the merits of our case,' said a spokesman for the US exchange.

Sources close to Nasdaq said the public comments from Threadneedle and Scottish Widows had been followed by a number of private messages of support.

'We have had a number of come-ons, only some of which have been made public,' said the source, who added that Nasdaq was holding off talking to investors temporarily in the hope the door would be opened by Ms Furse.

But the involvement of Threadneedle has been particularly welcomed because the London-based investor played a significant role in helping the LSE fend off a hostile, 580p-a-share bid from Australia's Macquarie Bank.

This was only one of a number of offers to have been made for the LSE over the last 15 months, including one from Euronext, the pan-European exchange based in Amsterdam, which will get the final go-ahead - with conditions attached - from the Competition Commission this morning.

The most likely new bidder for the London market is the New York Stock Exchange, which spent the weekend with its bankers, Citigroup.

The NYSE is hampered by its busy agenda. It listed its own shares only last week and has recently taken over the Archipelago trading platform, which will take time to absorb. But the NYSE chief executive, John Thain, said last week he wanted his exchange to be at the heart of further consolidation in the sector.

The LSE was unwilling to make any further public comments but privately some sources said there would be no talks with Nasdaq or anyone else unless more than 950p a share was on the table.

© The Guardian