24 January 2007

FT: Nasdaq and LSE impasse on 'final' offer

Nasdaq yesterday insisted its £12.43-a-share offer for the London Stock Exchange was 'full and fair' and tore into the London market's growth forecasts as the rhetoric from both sides in the bid battle took an increasingly hostile turn.

But the LSE said its board would continue to defend investor interests and would await an offer from the US exchange it could recommend to share-holders. Chris Gibson-Smith, chairman, said it was time for Nasdaq 'to put up or shut up'.

Nasdaq said it was surprised the LSE had rebuffed every effort it had made to talk directly to its board. 'Our chairman called the LSE chairman on the opening day of the bid and he said he would call us back,' a Nasdaq spokesman said. 'We are still waiting for his call.'

In what it billed as a response to the LSE's second defence document issued last week, Nasdaq said the London exchange's revenue forecasts assumed trading volume growth for 2008 that was well ahead of the growth rate seen in December.

In contrast, a forecast it made a year ago to see off an earlier hostile bid assumed growth rates modestly below what it was then experiencing.

The LSE countered that it was confident it would achieve the growth targets and termed Nasdaq's criticisms 'self-serving'. It said Nasdaq, which has a 28.75 per cent stake in the LSE, had interests that were not aligned with those of other shareholders. Both sides accused each other of being unwilling to engage in talks that might lead to an agreed bid.

Nasdaq has until midnight on January 27 to improve its offer, which it cannot do without the LSE board agreeing to the terms.

It has stuck to the line that it will not pay more. For its part, the LSE again insisted there was nothing to discuss until Nasdaq approached it with a better price.

Privately, shareholders say they believe that at least one side, if not both, may be bluffing on their willingness to discuss better terms, adding that they do not believe Nasdaq will sell its stake as it has threatened.

LSE shares confirmed that view, with a closing price 10p lower at £13.06, but firmly ahead of Nasdaq's 'full and final' offer.

'You can argue that neither side is irrational,' said one shareholder who said he liquidated his position. Other bourses have been taken over for cash and shares at higher multiples than that offered for the LSE.

However, he noted that these included exchanges with derivatives platforms which attract higher multiples and are more resistant to competition.

He said Nasdaq was right to argue that equities trading would be an increasingly competitive business.

© Financial Times