27 November 2005

The Observer: Now Stock Exchange seeks Scandinavian alliance

The London Stock Exchange is considering merging with OMX, formerly OM Group of Sweden, to create a company with a market value of £2.5 billion. LSE's chief executive Clara Furse and chairman Christopher Gibson-Smith are understood to have examined plans for closer ties with OMX if - as they expect - the LSE retains its independence into the new year.

The LSE has been under siege for a year after expressions of interest from continental exchanges such as Euronext and Deutsche Borse, and more recently from Macquarie, the Australian investment group. But the LSE's soaraway share price has probably put it out of range of predators for the time being.

OMX was formed out of the merger in 2003 between the Stockholm and Helsinki exchanges, but the company's operations also include a technology division that develops trading platforms for exchanges around the world. OMX also runs exchanges in Baltic countries such as Lithuania and Latvia.

A tie-up between London and OMX would give the British exchange access to OMX's technological know-how and together they could jointly develop 'cutting edge trading technology', said a City source. The LSE has already embarked on building a new platform that is expected to be completed in 2007/8, but analysts say that the Swedes could give the project extra momentum.

OMX and London have already started working together on a number of projects, which included the launch in 2003 of a jointly run derivatives exchange. Six months later, the two sides agreed to co-operate in forming a pan-Nordic cash and derivatives exchange.

Gibson-Smith is considering options to cement ties with OMX, which range from joint ventures to cross shareholdings, but a full-scale merger is also on the cards. OMX is valued on the Stockholm market at £900 million.

In its earlier guise as OM Group, the firm launched a hostile takeover for the LSE in 2000, which broke up an unpopular merger proposal that would have allied London with Frankfurt-based Deutsche Borse.

© The Observer