INVESTORS bet on the London Stock Exchange (LSE) becoming the next hostile takeover target yesterday after US exchange Nasdaq dropped its bid for NYSE Euronext and rejoined the race for a merger partner.
LSE shares jumped 6.8 per cent despite it suffering a setback in its merger with the Toronto Metals Exchange when Canadian consortium Maple stepped up its counter-attack.
Instead the LSE’s merger mess is seen to make it an increasingly vulnerable target itself, with a bid from newly-single Nasdaq, its long-term suitor, likely.
Nasdaq was yesterday forced to drop its $11bn (£6.8bn) hostile bid with partner IntercontinentalExchange for NYSE Euronext after US antitrust regulators said they would block the deal.
Nasdaq OMX chief executive Bob Greifeld said he was “surprised and disappointed in the antitrust division’s conclusion”.
But sources close to Nasdaq said while the NYSE Euronext bid had been opportunistic, the exchange was “keeping all its options open” with regard to further offers.
Analysts said if the Nasdaq approached the LSE with anything like its bid for NYSE Euronext – a 20 per cent premium on an already-raised share price – the offer would be “a no-brainer” for shareholders.
“If the offer was for a 25 per cent premium it would be a merger of equals,” one said, adding that there would be none of the antitrust issues that have dogged the Nasdaq-ICE and NYSE Euronext deal and also NYSE Euronext’s agreed merger with the Deutsche Boerse, which must pass European regulators.
But he warned that another hostile bid by Nasdaq was as unlikely to succeed in London as it had in the US.
“The greatest lesson of the past five years is that in exchange land you cannot do deals without them being friendly – therefore having buy-in from the LSE’s board and management team is important.”
Numis analyst James Hamilton said he saw a more than 50 per cent chance that TMX shareholders would reject the current offer from the LSE – but a higher LSE offer would be less likely to pass regulatory hurdles.
“The failure of the deal increases the risk of an offer being made for the LSE. Post a failed deal the LSE’s market position will be relatively small in the new larger exchange world,” he said.
“We believe the long term strength of the LSE’s market position is dependant on it finding increased scale.”
Sources close to the LSE dismissed the idea of a Nasdaq bid, citing concerns over the high level of debt that would be incurred by such a deal.
Greifeld has led two previous bids in 2006 for the LSE, including a hostile bid in November 2006, which were both rejected out of hand.