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Nasdaq Bid to Buy London Exchange Rejected by European Market Giant

By Heather Timmons and James Kanter
THE NEW YORK TIMES


LONDON

The Nasdaq Stock Market has intensified a trans-Atlantic takeover battle for the London Stock Exchange in an effort to overtake the rival New York Stock Exchange as the world’s leading equity marketplace.

The London exchange, the largest in Europe, quickly rejected Nasdaq’s $5.1 billion cash offer on Monday and said it would not meet with Nasdaq executives. Nasdaq officials said that while they still hoped to reach a friendly deal, they planned to go ahead with their offer.

The London market is attractive to Nasdaq because it has benefited from a flood of new money from Asia and the Middle East. It has lured new listings because its regulatory regimen is seen as less onerous than the oversight of stock exchanges in the United States.

A combination of the London market and Nasdaq would create a company with 6,400 listings and a total market capitalization of $11.3 trillion pounds — making it the world’s biggest stock market, Nasdaq said.

The world’s stock markets are moving energetically to consolidate, under pressure from customers to reduce fees and offer global services. By merging, exchanges can pool their liquidity and offer better prices to buyers and sellers. Last week, a group of big investment banks added to the pressure by announcing plans to create a pan-European stock-trading platform next year.

Reaching a deal with London could help Nasdaq overtake its rival, the New York Stock Exchange’s parent NYSE Group, in Europe. The New York exchange and Euronext, a network of four European stock markets and a London derivatives market, are expected to ask shareholders for final approval of their planned merger in December.

This is the second time this year that Nasdaq has offered to acquire the London exchange. In March, London rejected an informal offer of 9.50 pounds a share. On Monday, Nasdaq made an offer of 12.43 pounds a share ($23.57), up more than 30 percent from March, but only 2 percent above the London exchange’s closing stock price of 12.18 pounds on Friday.

Much has changed since March, though. London’s shareholders have rapidly turned over, and as many as a third of its investors now are thought to be hedge funds, chiefly concerned not with a company’s long-term business strategy but with the highest short-term return.

“It is difficult to see how this is not going to go through,” said Lynton Jones, a founder of Bourse Consult in London, which advises stock exchanges, and a former head of Nasdaq’s international operations. “The London exchange is boxed into a corner.”

But Nasdaq may still need to sweeten its offer. Apparently anticipating a higher bid, investors bid up the shares of the London Stock Exchange 6 percent on Monday, to 12.91 pounds.