Nasdaq Stock Market Inc. abruptly dropped its 2.4 billion pound (euro3.5 billion; US$4.2 billion) bid for London Stock Exchange PLC without explanation on Thursday, sending shares in the bourse sharply lower.
The decision was the latest in a long line of bids for the LSE that have ended in collapse — Australia’s Macquarie Bank Ltd., Germany’s Deutsche Bourse AG and Sweden’s OM Gruppen have all failed in their tilts at Europe’s largest and oldest exchange.
New York-based Nasdaq said in a statement it reserved its right to make another bid for the LSE within the next six months if the London exchange’s board agreed to an offer or if a rival bidder emerged.
Nasdaq said it had nothing to add to its brief statement and the LSE also had no comment.
A person familiar with the bid who asked not to be named because of the fluidity of the situation said Nasdaq had preferred a friendly approach but felt the share price and considerations of the LSE’s stand-alone worth had become overvalued.
The LSE had not welcomed Nasdaq’s advances, claiming the 950 pence (US$16.52; euro13.77) per share preliminary offer made March 10 “substantially undervalues the company.”
Shares in the LSE had been trading well above that price recently after Macquarie made its ill-fated takeover attempt and rumors persisted of a bidding war, but they slumped 6.8 percent to close at 1,043.5 pence (US$18.21; euro15.18)
Shares of the Nasdaq Stock Market fell $1.74, or 4.2 percent, to $40.11.
Australia’s Macquarie, which was forced to drop its 580 pence (US$10.01; euro8.34) per share offer last month after receiving acceptances representing just 0.4 percent of the exchange, also argued that the LSE’s share price had become inflated because of the takeover interest.
Katrina Preston of Bridgewell Securities said Nasdaq executives “obviously weren’t prepared to get involved in a hostile takeover.” She said interest will now focus on the New York Stock Exchange, which has also been considered a potential bidder.
However, Octavio Marenzi, the chief executive of research and consulting firm Celent, said that the LSE might have become too expensive even for the NYSE.
“Euronext and Deutsche Boerse both will find this price too rich and would have to contend with competition issues forcing them out of their post-trade businesses,” said Marenzi. “That really only leaves the NYSE as a contender, who has stated its intention to play an important role in Europe, but not at any price. All this means that the LSE is likely to remain independent for the foreseeable future.”
New York Stock Exchange Chief Executive John Thain said in January that the exchange wants to play “a leadership role” in the industry’s consolidation, citing the LSE, Deutsche Boerse and pan-European exchange Euronext NV as the companies it was monitoring.
An NYSE spokesman, Rich Adamonis, said the exchange had no comment on Nasdaq’s dropped bid.
The LSE was also in the sights of Euronext and Deutsche Boerse, which called off a 1.35 billion pound approach in late 2004 after unhappy shareholders forced the resignation of its chief executive. OM Gruppen dropped its hostile takeover attempt in late 2000.
Euronext, which said more than a year ago that it was interested in bidding for the LSE but never made a firm offer, indicated Thursday it was no longer interested in renewing its advances.
“We’re sticking by the statement we made along with the full-year results statement on Feb. 14,” a spokesman said, referring to comments by Euronext Chief Executive Jean-Francois Theodore that he wanted to hammer out differences preventing a tie-up with Deutsche Boerse.
Deutsche Boerse declined to comment.
For its part, Nasdaq remains interested in taking advantage of other possible merger opportunties, and by leaving the window open to re-bid in six months, the U.S. stock market can hope that LSE’s stock price will continue to drop, making its bid more attractive.