U.S. News

Nasdaq's Bid For London Exchange Rebuffed Again

The Nasdaq Stock Market failed for the second time in a year to win control of the London Stock Exchange , revealing Saturday that its $5.3 billion hostile bid had been spurned by the British bourse's shareholders.

Nasdaq, which abandoned its first attempt at the LSE several months ago, had extended its current offer by two weeks in an attempt to win over more shareholders--a move that proved fruitless.

In the end the New York-based exchange received acceptances worth just 0.41% of the LSE's ordinary shares in return for its $24.35 per share bid.

Even added to the 28.75% share holding Nasdaq built up by buying in the market in recent months, that remained well short of the 50% it needed to begin taking control.

New Bid Barred

Nasdaq is now barred under British takeover law from renewing its bid for a year and declined to say Saturday what it planned to do with the 29.16% stake in the London bourse it retains.

Reflecting the increasingly acrimonious battle between the two exchanges in recent months, Nasdaq stood by its claims the LSE was overvalued, while the London exchange's board said it looked forward to going about its business "without the distraction of ill-considered approaches which fail to understand the value of the business."

Nasdaq was just one of many suitors for the LSE in recent years--Deutsche Boerse AG and Australia's Macquarie Bank made formal approaches while Euronext cited interest without naming a price--amid increasing pressure on stock exchanges to find merger partners so they can compete globally.

The New York Stock Exchange is due to close its $14.3 billion acquisition of Euronext, the operator of the Paris, Amsterdam, Brussels and Lisbon exchanges, within the next couple of months. The NYSE also recently took a major stake in India's largest bourse and signed a broad agreement with the Tokyo Stock Exchange, the world's second-biggest financial market.

A combination of the Nasdaq and LSE would have created the world's second trans-Atlantic exchange with about 6,400 listed companies carrying a total market value of $11.8 trillion.

Nasdaq Chief Executive Robert Greifeld has previously indicated that Nasdaq may keep its stake in the expectation that the LSE's shares will fall. He has said Nasdaq would consider offering its technology to an LSE rival--a consortium of banks known as Project Turquoise is planning a platform--in a move that appears to be part of Nasdaq's efforts to drive down the exchange's share price.

"Pursue Other Opportunities"

"Nasdaq will continue to pursue other opportunities to build on its existing position as the world's largest electronic equities exchange and we look forward to maintaining our strong track record of creating shareholder value through our industry-leading business model and strategy," Greifeld said in a statement.

He added that Nasdaq's disappointment at losing its bid was "tempered by the knowledge that we remained true to our value case."

Greifeld has consistently argued that the stock has been vastly inflated in recent years because of cross-Atlantic takeover fever, claiming earlier this week that the LSE is misleading shareholders by basing its growth prospects on "self-serving and misguided peer group selection."

The LSE has almost tripled its share value from 450 pence two years ago, with Chief Executive Clara Furse winning praise in Britain for holding out against the failed suitors. The stock closed flat at 1,282 pence ($25) on Friday.

"The price was never quite right, and it didn't seem like the Nasdaq was willing to pay a large premium for control," said David Easthope, an analyst with consulting firm Celent. "The London Stock Exchange realized there wasn't any urgency to being acquired, and this stalemate will be on for quite a bit unless the Nasdaq realizes they need the LSE and are willing to pay more."

Easthope added that Greifeld had built up expectations about a move into Europe so far "that it would be a disappointment if he abandoned Europe altogether."

"It is apparent there is great growth potential in Europe with accelerated volumes and very strong trading potential," Easthope added.