19 December 2006

LSE: Shareholder Circular to reject Nasdaq takeover

The Board of the LSE issued its shareholder circular in response to the final Nasdaq offer. It unanimously rejects “Nasdaq’s wholly inadequate offer as it substantially undervalues the Exchange Group and fails to reflect the unique strategic position and the powerful earnings and operational momentum of the business.” The Board highlights that Nasdaq’s final offer is the lowest price Nasdaq can currently offer under the Takeover Code.

The Circular includes the Exchange Group’s forecast for adjusted basic earnings per share for the 12 months to 31 December 2006 which is expected to be not less than 50.4 pence per share, an increase of no less than 58 per cent. The Board also announces its intention to recommend a FY 2007 final dividend of not less than 12 pence per share, bringing the total dividend for FY 2007 to at least 18 pence per share, an increase of at least 50 per cent compared to FY 2006.

The offer values the Exchange Group at a multiple of 24.7x adjusted basic EPS for the 12 months to 31 December 2006, lower than the multiple of 29.8x adjusted earnings for the 12 months to 31 December 2005 from Nasdaq’s withdrawn proposal in March 2006. Nasdaq’s final offer is also lower than the trading multiple for Euronext N.V. of 30.1x for the 12 months to 31 December 2006.

Consequently, the Board of the Exchange Group strongly recommends that Exchange Group shareholders reject Nasdaq’s wholly inadequate offer and take no action in respect of their shareholdings.

The LSE said that the offer was the lowest price that Nasdaq could make under current takeover rules. ''Over the last twelve months, records have tumbled in terms of money raised as well as the volume and value of trading on our markets,' chairman Chris Gibson-Smith said. 'For the second time this year, Nasdaq is offering a wholly inadequate price for the company and shareholders should reject the offer,' he added.

Circular

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