Nasdaq buy renews talk of LSE takeover

LONDON - The Nasdaq has bought an almost 15 per cent stake in the London Stock Exchange, making it the biggest shareholder and raising speculation it may revive a takeover bid.

The purchase of the 14.99 per cent stake comes a month after Nasdaq dropped a proposed cash bid of £2.4 billion ($6.95 billion) for the LSE, Europe's largest stock market, after being rebuffed by the exchange.

Nasdaq, the second-biggest US stock exchange operator, had left the door open to a tie-up, saying it might make an offer under certain circumstances, such as if a rival bidder emerged or the LSE agreed another deal.

"I think this is the first step to redirect their efforts towards acquiring the LSE," said Richard Repetto, analyst at Sandler O'Neill. "I don't think it is necessarily hostile right now but it certainly could be the first step towards that direction - it depends how the LSE reacts."

Nasdaq said it bought the 14.99 per cent stake for about £448 million.

It bought about 35 million LSE shares from Threadneedle Asset Management - the entire holding of what had been the LSE's largest institutional shareholder, at a price of £11.75 a share.

It also bought further shares to take its holding to 38.1 million, representing 14.99 per cent of the LSE.

Nasdaq had dropped its takeover offer after it met with shareholders, including Threadneedle.

A spokesman for Nasdaq said only that the 15 per cent stake was "a strategic purchase".

The stake keeps Nasdaq just under a UK threshold that restricts the number of shares a party can buy in a seven-day period.

There are also restrictions on the speed with which a party can increase its stake up to 30 per cent. Once the 30 per cent threshold is reached, a party has to launch a takeover bid.

A source said the purchase of the stake allowed Nasdaq to keep its options open, giving the exchange a head start should it decide to launch a new offer for the LSE, and a lucrative exit should another bourse outgun it in a bidding war.

"It is a reasonably good move, but I don't think Nasdaq will necessarily end up with it [the LSE]," said Axel Merk, manager of the Merk Hard Currency Fund in Palo Alto, California.

"At some point, there will be a transaction and it will be at a premium, so from that point of view this is a good investment. The LSE is not going to give up control to someone they don't agree with but, in the end, money talks."

The move comes as the LSE goes ahead with a £510 million return of cash to shareholders while mulling over its options such as a tie-up with Nordic bourse operator OMX or a merger with multinational European bourse operator Euronext.

Threadneedle confirmed it had sold its holding saying it was pleased to see the company's value recognised by the market. 

- REUTERS