Markit, a post-trade services specialist, said the LCH board had failed to back its bid to buy the entire company for a reported €15 (£13) per share, a decision that leaves the LSE the forerunner to buy a controlling stake.
“We unfortunately did not receive the LCH.Clearnet board support required to move ahead and seek shareholder support,” Markit said.
A deal would be a significant coup for LSE chief executive Xavier Rolet as he seeks to diversify the exchange and move on from the failed attempt to merge with Canada’s TMX Group.
Analysts said the deal made excellent strategic sense but warned that it was very hard to know what the right price for LCH may be, leaving the LSE at risk of overpaying.
The exchange has offered €21 per share for 51 per cent of the equity in LCH, the Financial Times reported.
But Berenberg Bank analyst Richard Perrott said LCH shares had traded hands for €10 at least the past five years, far below the LSE’s offer.
LSE and LCH remain in discussions.