A possible tie-up between Euronext, the pan-European stock exchange operator, and the New York Stock Exchange (NYSE), has put pressure on the London Stock Exchange (LSE) to decide whether its future indeed lies alone, analysts said on Monday.
The NYSE said on Monday it had offered to buy Euronext NV, which is also being courted by the German stock exchange, to create a group with a value of 16 billion euros (US$21 billion).
Over the past 17 months the LSE, Europe's biggest stock exchange, has turned down takeover approaches from Deutsche Boerse AG, operator of the Frankfurt stock exchange, Australian investment group Macquarie Bank and the US-based NASDAQ Stock Market.
Following the rejection of its bid in March, the NASDAQ has built up a 25.1-percent stake in the LSE, becoming its largest shareholder and winning the right to block any strategic decisions made by the LSE board.
Amid the NYSE approach towards Euronext, the LSE faced a renewed bid by the NASDAQ, according to Richard Hunter, head of UK equities at Hargreaves Lansdown Stockbrokers.
"Should NYSE get Euronext, NASDAQ pretty much has the field to itself," regarding a bid for the LSE, he said.
"With NASDAQ holding more than 25 percent of LSE it is a question of when, not if" the US operator bids for LSE.
Under British takeover rules, shareholders taking their stake in a company above 30 percent are required to make a full takeover bid.
The NASDAQ, which is dominated by US technology listings including online search engine Google, saw the LSE reject its £9.50 (US$17.83) per share takeover offer earlier this year.
At Monday's close the LSE share price stood at £11.90, down 4.42 percent compared with Friday.
Mamoun Tazi, analyst for Man Securities, said the LSE could fend off a bid by NASDAQ and was even in a position to make a counter offer for Euronext.
"It has the financial means to do so," he said, adding however that the best solution would be a three-way tie-up between the NYSE, Euronext and the LSE.
Such a move would leave Deutsche Boerse further adrift of its European rivals.
Analysts said the stakes were high for Deutsche Boerse, especially in view of its repeated failure to join forces with the LSE in recent years.
"It's looking bad," said LRP analyst Olaf Kayser.
Deutsche Boerse struck back Tuesday in the battle for rival exchange operator Euronext, saying its merger plan includes paying 2 billion euros in cash to shareholders and would bring synergies worth 300 million euros.
Deutshe Boerse has proposed folding itself and Euronext into a new company headquartered in Frankfurt.
Detailing its offer for the first time, Deutsche Boerse said the cash payment was designed to introduce debt into the proposed new company and would be split between shareholders in both itself and Euronext.
"Deutsche Boerse strongly believes that this transaction represents the most attractive combination for shareholders, customers and the financial centers involved," it said in a statement.
"Furthermore it is the only option available at this point that accelerates to the further integration of European financial markets within a European regulatory environment," it said.
But Euronext yesterday rebuffed Deutsche Boerse's expanded take-over proposal, calling it misleading, and said the offer by the NYSE remained more attractive.
In a statement ahead of yesterday's Euronext shareholder meeting in Amsterdam, the pan-European exchange said it had studied both proposals and the latest Deutsche Boerse proposal was actually the same as the one issued last week.
If Deutsche Boerse failed to tie the knot with Euronext, it would have to seek alliances with other European exchanges, such as Madrid, Zurich or Milan.
"But Euronext has better chances with, say, the Borsa Italiana in Milan," Kayser said.
Alternatively, Deutsche Boerse could seek partnerships with exchanges in eastern Europe or Asia.
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