04 May 2006

Times: Nasdaq lifts LSE stake in attempt to shut out rivals

NASDAQ raised its stake in the London Stock Exchange to 18.7 per cent with the purchase of ten million shares yesterday, increasing pressure on the New York Stock Exchange to reveal its hand.

Bob Greifeld, chief executive of Nasdaq, said that the company had bought the shares for more than $119 million (£65 million), raising its interest in the London market from the 14.99 per cent it acquired in a “tea-time raid” last month.

One London source said that the latest share purchase, believed to have mainly come from Wellington, the hedge fund that is one of the LSE’s biggest shareholders, was designed to push Nasdaq’s holding over 20 per cent but fell short.

A spokeswoman for Nasdaq said: “Our increased stake strengthens Nasdaq’s position as the largest shareholder of the LSE.” She declined to comment on whether Nasdaq was planning further acquisitions of LSE shares but a Nasdaq source said that a further purchase of about 6 per cent of the LSE’s shares would be considered as soon as Takeover Panel rules allowed.

The LSE turned down an unsolicited offer from Nasdaq in March.

Market observers said that Nasdaq was trying to shut out any other bidders, in particular the NYSE, its fierce rival, which has also expressed an interest in London. Under the rules governing takeovers, Nasdaq cannot launch a formal offer until September after dropping its earlier bid at the end of March. But it is allowed to increase its holding to 29.9 per cent, which would present an insuperable obstacle to any other bidder coming in.

The Times revealed after Nasdaq’s first purchase that the company was planning at least two more share purchases, with the aim of taking its stake up to about 25 per cent.

Under the rules, any subsequent bid has to be at the highest price paid for the shares, which requires Nasdaq to offer at least £12.18. This would value the LSE at £3.1 billion. LSE shares jumped 26½p to £12.44 on the news.

The move came as Euronext, once seen as a natural bidder for the LSE, ruled itself out of the auction. The company, which operates four continental exchanges including Paris, was required to publish the agenda ahead of what could be a fraught annual meeting on May 23.

This made it clear that, in the light of Nasdaq’s earlier stake, the company was no longer in talks with the LSE. Instead, a group of shareholders are attempting to engineer a merger with Deutsche Börse, an earlier suitor for the LSE.

The agenda cautions, however, that it is too early to give details on any such merger. It is believed that at least some of the board members are unwilling to link up with the Germans.

Neither the NYSE nor the LSE would comment

By James Doran, Wall Street Correspondent and Martin Waller

© The Times