Nasdaq scorns LSE takeover defence

Last updated at 17:08 08 January 2007


Nasdaq today poured scorn on the London Stock Exchange’s initial defence of its £2.7 billion hostile takeover bid, and tried to spike chief

executive Clara Furse’s guns by deriding its forthcoming results.

It accused the exchange of "milking" its customers, and threatened it could sell its 29 percent stake.

It also claimed there is growing dissatisfaction among the London exchange's customers, most of

whom were among its original shareholders.

In a letter to LSE investors, Nasdaq told them they should "not be misled by a simple emphasis on volume growth without price cuts, a defensive

return of capital, or potential initiatives that could promote piecemeal co-operation or minority blocking stakes".

It added: "In our view, LSE has been milking its dominant position during a high-growth phase in an unsustainable manner."

Bob Greifeld, Nasdaq's chief executive, said: "Our proposal presents a unique opportunity to create a global, balanced and scalable exchange business.

"Together with Nasdaq, the LSE will be better positioned to meet new and increasing challenges,

including competing initiatives from customers, significant regulatory changes, and the recent wave of consolidation among powerful competitors.

"The LSE circular presented a weak case to shareholders and offered no new important

information."

He warned that, if its bid failed, Nasdaq may set up a rival share exchange in London or do so in cooperation with another partner.

Nasdaq's first closing date for its 1243p a share offer is this Thursday, but the bid is bound to be extended until its final possible date which is 10 February.

The LSE share price, up 2p today to 1285p, is currently ahead of Nasdaq's

offer.

Many of the hedge funds which now own over a quarter of the shares have paid over 1300p for

their stakes.

Greifeld also accused Furse, chairman Chris Gibson-Smith and the rest of the Stock Exchange board of placing independence before shareholder

value.

The New York-based exchange repeated its assertion that without its bid the LSE share price "would be worth far less".

It added: "A lapsing of our final offer is likely to precipitate a substantial fall in the

share price."

Nasdaq also warned that, if its bid fails, it could sell its 28.75 percent stake which it bought at an average of 1100p a share.

It said the exchange's forthcoming results "in no way changes the fact that LSE's value case has been entirely based on current and historical

financial performance".

In addition, it said plans by seven investment banks to launch their own share-trading platform, under Project Turquoise and a data platform called Project Boat, were not just threats to the LSE but also clear indications that its own customers are not satisfied with its services.

An LSE spokesman had no comment to make immediately on the Nasdaq document, but said the exchange would "respond in due course".

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