Yank Bid for LSE Would Bring SEC Along

The London Stock Exchange has been a takeover target for quite some time. Germany’s Deutsche Borse offered £1.35 billion in late 2004 that didn’t pan out. A couple of weeks ago, Australian investment bank Macquarie saw a 580p bid fail to impress the LSE shareholders. Friday, NASDAQ’s £2.43 billion (950p a share) offer received a polite “no.” Over the week-end, the talk was about the New York Stock Exchange’s request to Citibank to investigate the possibility of a rival bid. When the SEC gets involved in European stock trading, the LSE will wish it had taken the 580p from Macquarie.

The NASDAQ offer, and the expectations of a NYSE rival bid, stems from the desire to create a transatlantic exchange. Exchanges all over the world are under pressure to reduce costs and boost listings and trades, and one of the obvious ways to do that is by North American exchanges expanding into Europe, and vice versa.

Credit Suisse analysts wrote in a research note, “We believe that an acquisition of the LSE at a slightly higher price [than that offered by NASDAQ] by another exchange is now increasingly likely in the near future. In our view neither Nasdaq or the NYSE will want the other party acquiring the LSE given its scarce strategic position as the major international listings venue.” That should make investors in the LSE happy as they see the value of their shares rise in a bidding war.

Thus far, the bids have undervalued the shares, according to the shareholders. However, “We are now willing to discuss proposals with interested parties with the long-term interest of our clients remaining our paramount concern,” said Threadneedle Investments head of equities Michael Taylor. “The market’s valuation is beginning to reflect current realities.” Meaning, “we will sell at around ten quid.”

However, where the US exchanges go, the American Securities and Exchange Commission follows. This is one instance where the US has more and heavier regulations that Europe. Indeed, there are exchanges in Europe that are casinos at best, the LSE not among them. All the same, firms listed on the LSE don’t have Sarbanes-Oxley to deal with, or any of the other reporting issues that makes running a business in America a headache as well as much more attractive to investors.

It is hard to see how the SEC can allow the NYSE or NASDAQ buy the LSE without getting its fingers in the pie. Europeans won’t have to file all the forms, but there will be, by the laws of bureaucracy, an expansion of SEC supervision of European business. Maybe 580p and being left alone wasn’t all that bad.

© Copyright 2006 by The Kensington Review, Jeff Myhre, PhD, Editor. No part of this publication may be reproduced without written consent. Produced using Fedora Linux.

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