The London Stock Exchange, has rejected a £1.3 billion cash bid from Deutsche Boerse to create a dominant European exchange, but has held the door open to talks.
“The Board of LSE firmly believes that the proposal undervalues the Company and the substantial synergies that would be available from the combination of LSE with another major exchange group,” the LSE said in a statement on Monday. The cash offer of 530 pence per share represents a 23% premium to Friday's closing share price of 430 pence per share.
The LSE said it had been advised that there could be no assurance that any transaction could be successfully implemented, but it had agreed to hold discussions with Deutsche Boerse to see if a “significantly improved proposal” that would be capable of being implemented could be agreed.
Deutsche Boerse confirmed its offer for the London exchange and accepted the invitation to talk with LSE. It said its proposal offered a premium of more than 50% over the market price of LSE stock and would materially reduce the cost of electronic share trading in Britain. Exchanges are under pressure to merge as a single market in financial services emerges in the European Union, whereby banks will be able to compete more widely with bourses to trade shares.
Deutsche Boerse, with a market capitalisation of around $6 billion (£3.1 billion), has long been known to have an appetite for the LSE. The LSE and Deutsche Boerse were locked in merger talks back in 2000. However, failure by Deutsche Boerse to come up with the goods could pave the way for Euronext to come in with a bid of its own. On the fundamentals many analysts regard the German offer as generous.
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