Sunday, March 12, 2006

NASDAQ makes an informal offer for the London Stock Exchange; Offer is Rebuffed

In a unexpected takeover overture, U.S. based OTC exchange NASDAQ made an informal offer to the London Stock Exchange to buy the British entity for $4.1 billion in cash. The offer, the London Stock Exchange announced it had received on Friday, was quickly met with rejection by the LSE, which said it undervalued the enterprise's worth.

Many may recall that Euronext and the Deutsche Borse exchange have made attempts at acquiring the LSE, but have been met with rejection. There were rumors in 2005 that Australian based Macquarie was interested in LSE, but nothing has panned out.

The prospects of a deal between a U.S. based exchange like the NASDAQ and the London Stock Exchange seems logical given how much dynamics in the exchange industry have changed. The New York Times article linked above makes an interesting point when it states that the move by NASDAQ was an attempt to be a suitor for an attractive target before the newly public NYSE could swallow it. This makes sense given that NYSE CEO John Thain has publicly stated that one of NYSE's goals as a public company is to pursue acquisitions, since it has the currency to do so.

In other interesting news, one of NASDAQ's advisors has announced that it will be relinquishing its role given potential conflicts. J.P. Morgan has stated that due to the fact that it has a joint venture relationship with Cazenove Group, conflicts exist that make advising NASDAQ through a hostile deal could be problematic. More specifically, Cazenove is a corporate broker for the LSE. "Corporate broking is a particularly British type of banking advice where bankers serve as confidants and advisers to a company's chief executive. The broker can provide advice on mergers and acquisitions, underwrite stock issuances and take the pulse of investors before a company makes a move."

It will be interesting to see how everything plays out.


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