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Nasdaq says it won't raise offer for London Stock Exchange before bid deadline

Nasdaq says it won't raise offer for London Stock Exchange before bid deadline

The Nasdaq Stock Market Inc. dug in its heels Friday and refused to raise its hostile takeover bid for the London Stock Exchange after the British bourse declined to discuss a tie-up.
The New York-based electronic exchange said LSE shareholders pledged only 0.62 percent of ordinary, or common, shares by a Friday deadline to tender their shares. The amount was far from reaching the 21 percent needed to complete its hostile 2.7 billion pound (US$5.3 billion; euro4 billion) takeover, and forced the Nasdaq, which holds a nearly 30 percent stake in the LSE, to extend the deadline until Feb. 10.
"This very low level of acceptances is in line with the board's view that Nasdaq's offer substantially undervalues the exchange and fails to reflect its unique strategic position, outstanding financial performance and excellent prospects," the LSE said in a statement.
The Nasdaq's resistance to raising the bid this week led to an acrimonious exchange between the two companies about the LSE's future. Analysts said the Nasdaq's decision, which caught some by surprise, was a risky one aimed at flushing out investors who had been holding out for a higher bid.
The LSE's shares closed up 0.7 percent higher at 1,292 pence (US$25.33; euro19.63), which analysts said indicated that investors either do not believe another bidder will emerge or are happy for the LSE to remain independent. The Nasdaq fell 9 cents to US$33.98 (euro26.20) in afternoon trading in the U.S.
"Given the current circumstances, it doesn't look good," said Cubillas Ding, a senior analyst at financial and consulting firm Celent, of Nasdaq's bid. "The LSE will continue to build shareholder support, emphasizing its strong business and bright future independently."
But Fox-Pitt Kelton analyst Andrew Mitchell said Nasdaq is being "quite brave" by closing the door on negotiations.
"They made the judgment that a sufficient number of shareholders will cash in ... so they can edge just over 50 percent" and take over the LSE, he said.
Nasdaq needs to receive acceptances from just over 50 percent of the LSE's shareholders _ which would include its own 29.37 percent stake _ to complete its acquisition. The exchange, which now has two weeks to court investors, at last count has a 29.37 percent stake in the LSE.
The tussle between the Nasdaq and the LSE has become increasingly rancorous in recent weeks, with the two bourses at public loggerheads over the value of the London exchange.
A combination of the Nasdaq and LSE would create the second trans-Atlantic exchange with about 6,400 listed companies that carry a total market value of US$11.8 trillion (euro9.1 trillion). The New York Stock Exchange is currently finalizing its US$14.3 billion (euro11.1 billion)takeover of Paris-based Euronext NV.
But LSE Chief Executive Clara Furse has been scathing of the Nasdaq offer, repeatedly highlighting the independent growth prospects of her exchange.
The exchange last week predicted that trading volumes will rise by 180 percent in the year to March 2008 and in a further sweetener, promised shareholders an extra 250 million pounds (US$491 million; euro380 million) in share buybacks if they rejected the Nasdaq bid.
That share buyback offer came on top of 50 million pounds (euro76 million; US$98 million) offered earlier this year, and raises the total offer over the last 2 1/2 years to 974 million pounds (euro1.48 billion; US$1.9 billion).
Nasdaq, meanwhile, has been angered by the LSE's refusal to engage in any discussion on its offer and dismissive of the strong growth forecasts.
The U.S. exchange has not yet announced the number of acceptances it has received on its existing offer, but reiterated this week that it retained the right to raise its offer if another bidder emerged.
If Nasdaq fails in its current bid it would be barred from making another approach for the LSE for 12 months under U.K. takeover rules. That would leave Nasdaq stranded amid trans-Atlantic consolidation _ aside the NYSE-Euronext deal, seven investment banks, including Goldman Sachs and Citigroup Inc., have unveiled plans for a rival European platform of their own to challenge the likes of the LSE.
Ding said Nasdaq was probably "already be considering other avenues to market," and would likely look for other acquisitions rather than a stand-alone venture.
"Whatever the case, doing nothing is not likely to be an option for Nasdaq, given that NYSE-Euronext is fast becoming a reality," Ding said. "On top of that, NYSE's recent talks of linking with Tokyo Stock Exchange are piling on the pressure on Nasdaq."
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