London Stock Exchange rises from hunted to hunter

LONDON - The London Stock Exchange is in a position to stay independent and even embark upon the merger trail itself as its value rises and the number of its potential predators falls away, analysts say.

Earlier in the week, the Nasdaq dropped a £2.4 billion ($6.90 billion) proposed offer for the LSE, becoming the fourth suitor in a year to abandon pursuit of Europe's biggest stock market.

As the race for the exchange heated up and the sector enjoyed a re-rating as a whole, shares in the London share bourse have surged to a record high at 1219 pence - valuing the exchange at more than £3 billion.

"Their [LSE's] prospects look much better, they have more currency in terms of their P/E [price-to-earnings multiple]," said Michael Long, an analyst at Keefe, Bruyette & Woods.

"They are in a position to be looking at an acquisition for the first time since the LIFFE debacle."

The LSE failed to buy LIFFE, London's futures and options exchange, in 2001 after being outbid by pan-European rival Euronext.

Analysts said LSE could look to a tie-up with Nordic exchange operator OMX, with which it held talks last year.

Those talks were put on hold as the LSE faced pursuit from Australia's Macquarie Bank and Euronext.

OMX chief executive Magnus Bocker told a Swedish newspaper at the time it remained amenable to a merger with London, adding that OMX and LSE could together create better and cheaper solutions for clients.

Long said OMX was generally open to a partnership with the LSE. "A deal offers LSE revenue diversity as it has a reasonably large derivatives business. Then there is big technology business which could be run as a separate business."

LSE chief executive Clara Furse has defended the company from repeated attempts to buy the exchange, saying the bourse will only consider offers that value the exchange fairly.

Long added: "With hindsight, rejecting Deutsche Boerse's 530 pence [offer] was a good move as the business is now worth much more as the whole exchange sector has rerated.

"Rejecting the Macquarie bid [at 580p] was, therefore, a no-brainer."

Several analysts reckon LSE shares are worth around 1000p each as a standalone business. "The news increases the possibility that the LSE may remain independent for the time being," said Stuart Duncan, an analyst from Numis Securities.


Merger talks get green light

FRANKFURT - German stock exchange operator Deutsche Boerse got the go-ahead to start concrete merger talks with European rival Euronext after a meeting of its supervisory board yesterday.

Deutsche Boerse said last month it wanted to merge with Euronext to create a pan-European securities market group. Such a merger would create Europe's biggest cash market trading group and the world's biggest derivatives trading operator.

Euronext was not immediately available for comment but said this month it was ready for talks with Deutsche Boerse "as soon as possible" on a merger.

Deutsche Boerse's supervisory board chairman Kurt Viermetz said: "We are convinced that a merger of partners with Euronext is the best possible approach to create a truly European exchange organisation."

Chief executive Reto Francioni said: "As far as Deutsche Boerse is concerned, all prerequisites are met, and there is a clear mandate to enter timely into negotiations with Euronext."

- REUTERS