Shares in the London Stock Exchange PLC soared Monday as analysts banked on the eruption of a bidding war for the bourse following the takeover approach disclosed last week by New York-based Nasdaq Stock Market Inc.
LSE shares jumped 27 percent to 1,120 pence ($19.34) at midday — an 18 percent premium to the 950 pence ($16.40) per share cash offer from Nasdaq revealed Friday.
The LSE rejected that 2.4 billion pound ($4.2 billion) approach, claiming — as it has with previous offers from Deutsche Boerse AG and Macquarie Bank Ltd. — that it undervalued the exchange.
Its value pushed higher Monday as investors anticipated a higher offer from Nasdaq and digested reports that the New York Stock Exchange Group Inc. and pan-European exchange owner Euronext NV may be also come forward with an offer.
“The initial share price reaction has shown that the 950 pence bid is already history,” said Richard Hunter, head of equities at Hargreaves Lansdown Stockbrokers.
“However, it also means that, as any price war develops, it will be increasingly difficult for the LSE to reject further approaches on the grounds of undervaluation.”
Euronext did not immediately return calls seeking comment and the New York Stock Exchange could not immediately be reached Monday.
The LSE’s share price has more than doubled from 450 pence just under a year ago amid concrete approaches and rumors of further interest in Europe’s oldest bourse.
The takeover race was launched by Deutsche Boerse AG with its 1.35 billion pound approach in late 2004, although the German exchange later retreated when unhappy shareholders forced the resignation of its chief executive.
Last month, Australia’s Macquarie Bank Ltd. was forced to drop its 580 pence ($10.01) per share offer after receiving acceptances representing just 0.4 percent of the exchange.
Macquarie argued that the LSE’s share price had become inflated because of the takeover interest swirling around it.
Nasdaq said Friday that it believed its proposal would “represent an attractive offer for shareholders, listed companies and the trading community and reflects unique benefits for LSE which have not to date been proffered by other parties.”
The LSE revealed details of Nasdaq’s approach after the stock market closed on Friday. Media reports over the weekend said that both the New York Stock Exchange and Euronext were preparing to make bids.
NYSE Chief Executive John Thain said last month the exchange wants to play “a leadership role” in the industry’s consolidation, citing the LSE, Deutsche Boerse AG and Euronext — which owns the Paris, Amsterdam, Brussels and Lisbon stock exchanges — as the companies it was monitoring.
The LSE, which has repeatedly cited its independent growth prospects, has said it would push ahead with its share capital return plan announced last month. It revealed then that it was doubling the cash it plans to return to shareholders in an effort to cement support against the 1.5 billion pound ($2.6 billion) takeover offer from Macquarie.
The capital return of 510 million pounds ($886 million) was accompanied by a share buyback program of up to 50 million pounds ($87 million) a year.