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The new 1,243 pence per share offer for LSE follows Nasdaq's original indicative bid of 950 pence, or £2.4bn, that was rejected by the LSE in March.
Since being rebuffed by the LSE Nasdaq has built up a 25.3% stake in the London exchange. In a separate statement Nasdaq says it has increased its holding to 28.75% after purchasing a further seven million shares for £87.8 million.
The new bid is the lowest offer Nasdaq was able to make under UK takeover laws, and is equivalent to the highest price it paid for LSE shares in the last six months.
LSE shares hit 1,298 pence in morning trading on the back of the news.
Nasdaq says its new cash offer is 'final', but it reserved the right to alter the bid on the recommendation of the LSE board or if another firms launches a rival bid.
The US exchange says it has requested a meeting with LSE's chairman to seek a recommendation of the final offer.
Nasdaq's offer is the highest the UK exchange has received in two years of attempted bids which began with a conditional offer of 530 pence per share from Deutsche Börse in December 2004.
But the 1,243 pence per share offer was quickly rejected by the UK exchange.
In a statement the LSE says its board believes that the proposal, which represents only a two per cent premium to the market price at the close of business on 17 November 2006, 'substantially undervalues the company and fails to reflect its unique strategic position and the powerful earnings and operational momentum of the business'.
LSE chairman Chris Gibson-Smith, says he has rejected Nasdaq's request for a meeting.
Commenting on the offer, Clara Furse, chief executive of the LSE, says: 'We believe Nasdaq's final offer fails to recognise the outstanding growth record and prospects of our group on a standalone basis let alone the exchange's unique global position.'
In response to the LSE's rejection Nasdaq's president and CEO Robert Greifeld has released a statement saying he is 'disappointed by the quick rejection of our proposal and the LSE board's refusal to meet with Nasdaq.'
The exchange says it appreciates the LSE's strong standalone growth prospects and believes that this potential is fully reflected in its cash offer.
'Nasdaq will proceed with its final offers to LSE shareholders at 1,243 pence per LSE ordinary share,' says the statement