LSE asks shareholders to reject Macquarie bid outright

LSE asks shareholders to reject Macquarie bid outright

	Published : Thu, 19 Jan 2006 17:05 By : Paula Demarzio Print this Story

LONDON: The London Stock Exchange has urged all its shareholders to reject the 1.5 billion takeover offer from Australia's Macquarie Bank. It said its board is posting its 40-page response to the bank's offer document Thursday.

In a statement, the exchange said, "The board continues to recommend that London Stock Exchange shareholders reject Macquarie's ill-considered offer."

It said the offer disregards the exchange's unique strategic position, ignores the quality and value of its franchise and incorrectly states that it has low profit growths.

Macquarie Bank had made an unsolicited 580 pence-a-share cash bid for the exchange on 15 December and in a bitter acrimony stated that the exchange is actually worth 500 pence a share and is "a low-growth business.''

The exchange, which has listings of companies valued at $2.8 trillion, has contested these charges saying its business is booming and its earnings are multiplying. The exchanges shares closed at 650 pence, 12 per cent higher than the offer by Macquarie Bank, giving it a total market value of 1.7 billion pounds.

The speculation of a takeover had led to a 51 per cent increase in its share prices since 10 December 2004. Apart from Macquarie Bank, Deutsche Borse AG and Euronext NV too have expressed interest in the exchange. Deutsche Borse had subsequently withdrawn its offer.

Some of the exchange's major shareholders, including Threadneedle Asset Management Ltd. and Scottish Widows Investment Partnership, have come out stating they will not accept the offer.

The exchange plans to distribute 250 million pounds to its shareholders.

Macquarie Bank and its partners intend to bring in 507 million pounds in cash and to raise the balance 1.1 billion through debt. Dresdner Bank AG has agreed to lend 1.28 billion pounds to the bank. In case the deal goes through, the debt will be more than nine times the exchange's earnings for 2006. There are fears that stem out of such a scenario that the new management will charge higher fees on members to service the debt. However, Macquarie Bank has clarified that it will not increase the fees or pass on the debt burden on to the exchange.

The exchange's shareholders have time till 3 p.m. London time 31 January to decide on the offer.

Meanwhile, Threadneedle Asset Management Ltd said it has enlarged its holding in the exchange by buying 222,000 shares, paying 88 pence per share more than the price that Macquarie Bank is offering. It now has a 13.3 per cent stake in the exchange, the largest single holding.

A formal offer is also likely to come from Euronext NV, once it has reached a final agreement with the U.K. Competition Commission over the conditions attached to its takeover attempt.