24 January 2007

Nasdaq set to extend LSE offer deadline as investors hold back

Acceptances for the £12.43-per- share offer are thought to be minimal to date, though investors have until Saturday to decide and a last-minute flurry of activity is expected.

Nasdaq, a New York-based exchange, this week attempted to put further pressure on the LSE board to enter discussions but it descended into a war of words as each side offered different versions of events.

The American bourse claimed it “was surprised” that the LSE board “has completely failed to engage” with its contemporaries. It also described the LSE’s forecasts for turnover growth as “ambitious”.

The London exchange retaliated that Nasdaq’s “self-serving criticism” underlined its “obvious need to acquire it – albeit on the cheap”.

Nasdaq is unable to raise its offer which, it reiterated, represented a “full and fair” price, until either an alternative bidder enters the fray or the LSE’s board enters into serious discussions and recommends a deal at a higher price.

Bob Greifeld, Nasdaq chief executive, went to the World Economic Forum in Davos, Switzerland, rather than engaging in an 11th-hour charm offensive with investors.

One insider said: “Investors have all the information they need to make the right choice.” Many hedge fund managers bought LSE shares in the expectation that £12.43 was merely a starting bid from Nasdaq.

Some have unwound their positions as the timetable has progressed and as no news of an increased offer has emerged.

This selling is expected to accelerate during the extended offer period. It is thought this could make Nasdaq’s terms, which are well below LSE’s share price, more attractive to investors.

Last week, the LSE promised to hand back up to £200m to shareholders as part of its efforts to persuade them to reject Nasdaq’s hostile bid. It has also promised to cut trading fees in its markets.

Nasdaq has not made any promises to cut fees but instead has pledged not to raise them. It owns 28% of LSE shares, while hedge funds and activist shareholders have some 30%.

Samuel Heyman, a US corporate raider, is the second-biggest shareholder with a stake of about 10.35%. It is believed many of his purchases took place at more than £13 per share.

It is not clear what Heyman intends to do with his stake. Some sources claim he is supportive of the LSE but dislikes its independent strategy.

Nasdaq will declare its offer unconditional if it receives the backing of 51.1% of the shares, which would give it control as a majority shareholder.

© The Business