Nasdaq buys 15% stake in LSE

Nasdaq buys 15% stake in LSE

	Published : Wed, 12 Apr 2006 14:15 By : Andrew Stead Print this Story

LONDON: In a surprise move, U.S. technology exchange the Nasdaq Stock Market bought nearly 15 per cent holding in its one-time acquisition target, the London Stock Exchange, thereby becoming the latter's largest shareholder. Nasdaq had recently withdrawn its 2.4-billion-pound offer for the exchange and the stake purchase now is seen by many as a strategic move to gain full control.

Nasdaq announced after trading hours on Tuesday that it has bought 35 million shares from Threadneedle Asset Management Ltd., LSE's largest institutional shareholder, constituting 14.99 per cent stake in the exchange. Under U.K. laws covering takeovers, Nasdaq can limit any further purchases to under 10 per cent over the next seven days. It has to limit its stake to under 30 per cent. Otherwise, it will have to launch a full takeover.

The U.S. exchange is understood to have paid 1,175 pence-a-share, or $781.7 million for the stake. The deal, which valued the exchange at around $5.2 billion, was at a premium of 23.6 per cent of Nasdaq's 950 pence-a-share offer for the London exchange and 13.1 per cent higher than LSE's Tuesday closing price of 1,038.5 pence.

Nasdaq had withdrawn its offer in late March as LSE's chief executive officer Clara Furse refused to discuss the issue. The stake acquisition will mean that the LSE board cannot ignore Nasdaq any more.

A spokesperson for the London exchange refused to comment on the acquisition or whether the exchange would now hold talks.

There are rumours that LSE had renewed its talks with pan-European exchange Euronext, which had earlier shown interest in a possible deal, which may have pushed Nasdaq into taking pre-emptive action. The U.S. exchange had, at the time of withdrawing its offer, reserved its right to return if LSE has an approach from a rival.

While the country's takeover rules bar Nasdaq from bidding for six months unless there is a rival offer, its acquisition of the stake puts it in a strong position, possibly to take a controlling interest in LSE. The holding can also act as a deterrent to Euronext.

Besides, Nasdaq and Euronext, the London exchange had also been approached by Germany's Deutsche Boerse and Australia's Macquarie Bank. Both the institutions had later dropped their bids.

The latest development, according to analysts, may spur Euronext and Deutsche Boerse to tie up in order to consolidate activities in Europe.

LSE shares have risen around 150 per cent over the past 12 months. The shares were up 14 per cent at 1,185-1/2 pence, above the 1,175 pence-a-share Nasdaq paid for its stake.