NASDAQ chief executive Robert Greifeld is undeterred by the London Stock Exchange's (LSE) rejection of a US$5.1 billion unsolicited bid to buy Europe's biggest equity market.
He has to be. The second-largest stock market in the US has fewer options now that NYSE Group Inc is poised to become the first trans-Atlantic equities exchange through its proposed combination with Euronext NV.
Greifeld became NASDAQ chief executive three years ago with a mandate to revitalize an enterprise pummeled by an ugly bear market and to expand its reputation beyond being a home for technology issues like Microsoft Corp. He needs this deal to convince investors that NASDAQ won't fall behind as financial markets consolidate.
"They are the crown jewel of the European market places," Greifeld said of the LSE in a Monday conference call with reporters. "We believe this is a powerful asset that is a natural partner with the NASDAQ. There is an increasingly clear path to the end game."
A NASDAQ-LSE combination would create the world's largest exchange by number of listings, with more than 6,400 companies carrying a market value of US$11.8 trillion. Monday's bid was the second NASDAQ has made since March, and follows offers made by Deutsche Boerse AG, Sweden's OM Gruppen AB and Australia's Macquaire Bank Ltd since 2000. All have been turned down.
The swift rejection from LSE chief executive Clara Furse was expected; she said NASDAQ's offer undervalues the British exchange and "fails to recognize the outstanding growth record and prospects of our group on a stand-alone basis.''
Greifeld, who calls the current offer "fair and full," is strengthening NASDAQ's position by making his firm the London exchange's biggest shareholder. His company has accumulated a stake in the LSE since its first bid was rejected, and increased its holdings on Monday to 28.75 percent, having obtained 7.1 million shares from what he described as a "long-term shareholder."
Though the intention is to get London's board to sit down for talks, NASDAQ can turn its bid hostile and lobby other LSE shareholders. Obtaining a 50 percent stake in the LSE -- which the NASDAQ will be able to pursue after a 30-day waiting period imposed by the UK Takeover Panel -- would give NASDAQ control of the board and allow it to virtually approve its own offer.
During the conference call, Greifeld stated, "we are not selling our shares," an indication he has no intention of backing down, even if there is another bidder for the LSE. The comment seemed directed at Furse, who still could seek out a white knight offering from one of the LSE's previous suitors or a new one.
Both Deutsche Boerse and OM Gruppen declined to comment about their interest in the LSE.
"He's made a really smart move, and it's a different competitive landscape than it was when they first bid on them," said Niamh Alexander, an analyst with CIBC World Markets.