NASDAQ Bids for London Stock Exchange, Again

The NASDAQ has made a hostile bid for the London Stock Exchange worth £2.7 billion, or US$5.3 billion. The price per share is now £12.43. On March 30, 2006, NASDAQ withdrew a 950p per share offer. The cost to NASDAQ is now more than a quarter higher than if it had pursued the purchase back then. NASDAQ has borrowed $5.1 billion to fund the takeover, so perhaps this time, it’s serious.

In April, this journal noted that the policy of management at NASDAQ was one of indecision. Also, one noted that the policy was a costly one. However, with each new bid and withdrawal, NASDAQ has increased its stake in the LSE (the stock exchange, not the London School of Economics) to the point it now has reached 28.75%. At this rate, NASDAQ will wake up one morning to find it has purchased the LSE in 100 share blocks.

The timing of the NASDAQ bid is elegant. By starting now, the LSE’s defense document will come out in the three working days between Christmas and New Year’s Day. However, this small advantage amounts to nothing because the NASDAQ pricing is still off the mark.

That is not to say the LSE is worth more than NASDAQ has offered. Robert Greifeld, NASDAQ’s CEO, said the offer represents “full and fair value” for the LSE and that it takes into account the “new competitive threats which the LSE will face in 2007 and beyond.” He may be right about that, but he’s wrong according to the market. The market price of the LSE is the far side of £13 a share. Unless someone got in the stock substantially below £12.43, the current offer just isn’t enough.

The analysts believe that hedge funds and other speculators have moved into the stock rather heavily of late. Indeed, they may control up to a third of the LSE’s stock. It is known that US corporate raider Samuel Heyman recently paid 1310p a share for a 9.13% stake in the LSE. He didn’t get to be rich buying high and selling low. And since the NASDAQ, under the rules of the game, can’t raise its offer unless the LSE board changes its mind and backs it or unless there’s a rival offer, this looks like another failed merger attempt already.

© 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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