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ASX, Euronext May Be Eyeing LSE Stake

NYSE Euronext and Australia's ASX may be interested in buying part of Nasdaq Stock Market's 31% stake in London Stock Exchange, a person familiar with the matter said on Monday.

ASX said there was no basis for market speculation that it was intending to buy Nasdaq's stake at this stage. "Should that position change, ASX will inform the market," ASX spokesman Matthew Gibbs said in Sydney on Tuesday.

The London Stock Exchange is pictured in central London, 25 June 2007.
SHAUN CURRY
The London Stock Exchange is pictured in central London, 25 June 2007.

ASX, with a market value of A$8.13 billion (US$6.7 billion), last year bought smaller rival SFE to expand into the derivatives business. That move was also seen by some analysts as move to thwart any takeover attempts.

In the past, ASX Chief Executive Robert Elstone has played down the possibility of buying small stakes in global stock exchanges. "I just don't believe in buying minority stakes," Elstone told analysts earlier this month. "So what the Tokyo Stock Exchange is doing in SGX or what SGX is doing in Bombay is not something you will see ASX do under any scenario."

ASX shares slipped 0.3% to A$47.45 in early Sydney trading on Tuesday, broadly inline with a fall in the benchmark S&P/ASX 200 Index.

"Whilst (it's) something I wouldn't rule out for the ASX, it's not something I see being at the front of Rob Elstone's agenda," said Mike Younger, an analyst with Citigroup in Sydney.

Nasdaq , the largest U.S. electronic stock exchange, said last week it was considering a sale of its roughly $1.6 billion (800 million pound) stake in the LSE to focus on buying Nordic exchange operator OMX.

At the time, Nasdaq said its bankers were already in touch with interested parties, and that it would not sell its LSE stake to a single buyer.

Singapore's state-owned Temasek Holdings may also be interested in buying some portion of the stake, while other parties, including private equity firms, have expressed interest, the person said. NYSE Euronext spokeswoman Richard Adamonis said the exchange does not
comment on rumors or speculation.

Global Tie-Ups

Stock exchanges around the world have been looking at tie-ups to offer customers a broader range of products and lower their technology costs.

NYSE Group which runs the New York Stock Exchange, bought European exchange operator Euronext for $14.6 billion in April to form NYSE Euronext. Concerns that NYSE Euronext will acquire another company have depressed its share price.

Nasdaq does not intend to sell its entire 31% LSE stake to one buyer, but may sell 29.9% to a single party and the remaining shares in the market, the person said.

Under U.K. rules, an investor who buys more than 30% of a company has to automatically make a bid for all of it.

If the price is not right, Nasdaq may choose not to sell its LSE stake at all, the person said. "At this point, there is no front-runner," the person said, adding that talks were just beginning.

Nasdaq Chief Executive Robert Greifeld said last week a premium was justified for its LSE stake.

Nasdaq wants to use the proceeds to pay down debt and buy back shares, which would effectively raise the value of its cash-and-share bid for OMX and give it a boost in the fast-consolidating global stock exchange sector.

Nasdaq is locked in a $4 billion bidding war with Borse Dubai for OMX, which owns exchanges in Sweden, Denmark, Finland, Iceland and the Baltic states.

Singapore's Temasek's interest comes amid growing protectionism in Europe and the United States toward sovereign wealth funds making aggressive overseas investments in search of higher returns.

Government-owned investment vehicles such as Temasek and its sister agency, Government of Singapore Investment Corp, control about $2 trillion -- roughly the size of France's economy -- a figure that is expected to grow to $12 trillion by 2015.

British newspaper The Sunday Times reported earlier that a deal between Nasdaq and Temasek could lead to a full takeover of the LSE by the Singaporean investment group.

Another British Sunday newspaper, The Observer, said Nasdaq was seeking to sell up to half its LSE stake to Germany's Deutsche Boerse.

The Daily Telegraph reported on Monday that Nasdaq may sell its LSE stake to Borse Dubai and make a joint bid with the Gulf exchange for OMX. It also said Nasdaq, which originally agreed to buy OMX for $3.7 billion, was expected to launch a higher bid closer to $4 billion.

Temasek and Borse Dubai officials were not immediately available for comment, while Nasdaq and Deutsche Boerse officials declined to comment.