Nasdaq in final offer for LSE

8 January, 2007 at 9:45 pm | Posted in Markets | Leave a comment

Nasdaq Stock Market Inc. urged London Stock Exchange Plc shareholders to accept its takeover bid that values the company at 2.7 billion pounds ($5.2 billion), arguing the shares will tumble if the offer is rejected.

Nasdaq in a regulatory filing today restated that its 1,243 pence-a-share offer represents a “full and fair price” given that the LSE faces increasing pressure to lower the fees it charges brokers for completing trades on Europe’s stock largest market. The 40-page document responds to the LSE’s Dec. 19 regulatory filing that urged investors to reject Nasdaq “wholly inadequate” bid and pledged to raise the company’s dividend by at least 50 percent.

Chief Executive Officer Robert Greifeld wants to expand Nasdaq overseas and boost profit by sharing technology across the U.K. and U.S. equity markets. His LSE counterpart, Clara Furse, has said the 308-year-old market can remain independent as trading and corporate listings continue to grow.

“Nasdaq seems to be trying to make sure that LSE shareholders are thinking about the risk of their position, and reiterating that they think the fundamentals will weaken,” said Ed Ditmire, an analyst at Fox-Pitt, Kelton Inc. in New York. “There are a lot of important dates coming up, as far as the offer goes.”

Nasdaq, the largest U.S. all-electronic equity market, gave investors until Jan. 11 to accept its offer for the 71.25 percent it doesn’t already own in the LSE. Nasdaq is likely to extend the deadline until Feb. 11, the latest date allowed under U.K. takeover rules, said Ditmire, who doesn’t own Nasdaq shares and has an “outperform” rating on the stock.

The rules require Nasdaq to declare after Jan. 11 the amount of stock shareholders agreed to tender. The company’s offer is conditional on gaining more than a 50 percent stake in the U.K. market.

Nasdaq claims the LSE has failed to acknowledge “growing customer dissatisfaction” over its fees as well as competitive threats from a group of brokerages, including Citigroup Inc. and Goldman Sachs Group Inc., that plans to launch a rival pan- European market, Nasdaq said.

The LSE said in a regulatory filing today that Nasdaq’s analysis of transaction fees is “blatantly misleading” and reiterated its plan to reduce trading costs.`Shareholders should not be persuaded into selling their shares well below their true value by Nasdaq’s bluster,” Furse said in a statement today.

Shares of LSE declined 1 pence to 1,282 pence in London, while Nasdaq shares rose 60 cents to $33.70 in composite trading at 12:27 a.m. in New York. Shares of the LSE have gained 24 percent since March 9, the day before Nasdaq’s bid was announced. Nasdaq shares dropped 16 percent over the same period.

Some investors including Samuel Heyman have bought stakes in the LSE anticipating a sweetened bid from Nasdaq. Heyman, who has in the past invested in companies to push them into changing management or strategy, purchased derivatives contracts on Jan. 5 that value shares of the LSE at as much as 1282 pence, or 3 percent higher than Nasdaq’s offer, according to a U.K. regulatory filing today. The purchase increased Heyman’s stake in the LSE to 9.96 percent from 9.65 percent Jan. 3, the filing shows.

In a separate regulatory filing today, LSE said that ING Bank NV cut its stake in the exchange to less than 3 percent from 3.88 percent on Nov. 21.

Nasdaq spent about $1.68 billion last year for its stake in LSE, which has twice rebuffed the company’s takeover bids. In March, Nasdaq offered to buy LSE for 950 pence a share. Nasdaq is appealing directly to shareholders after the LSE rejected the Nov. 20 offer of 1,243 pence a share.

LSE shareholders should not be “misled” by a return of money after the exchange pledged to raise its dividend this year, Nasdaq said today. A combination of Nasdaq and LSE would reinforce London’s position as Europe’s No. 1 financial center, Nasdaq said.

LSE will announce strong third-quarter earnings and revenue figures this week, almost three weeks ahead of schedule, as part of its campaign against Nasdaq’s bid, the Daily Telegraph reported earlier today, without saying where it got the information. John Wallace, a spokesman for the LSE, didn’t immediately return two calls seeking comment.

(Bloomberg)

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