Nasdaq Stock Market Inc. said Monday it has finally abandoned hopes to acquire the London Stock Exchange and will sell its 31 percent in the U.K. market to focus on a takeover battle for Sweden’s OMX AB.
The second-largest U.S. stock exchange had made two attempts to buy the LSE in as many years, each time being soundly rejected by shareholders. Nasdaq executives had maintained they were not interested in selling their stake, holding out hope that some kind of agreement could be worked out amid sweeping consolidation among global exchanges.
Robert Greifeld, Nasdaq’s chief executive, said he would use the sale to unlock billions of dollars from the stake. At least $1 billion of the proceeds would be used to retire debt and buy back shares, but some of the cash would likely be pumped into Nasdaq’s takeover battle with Borse Dubai to acquire Stockholm-based OMX.
“We see that the European competitive landscape will change, and change quite dramatically in the years to come,” Greifeld told analysts and investors on a conference call. He said the LSE stock price does not adequately reflect the true value of the investment.
A spokesman for the LSE would not comment on the Nasdaq’s decision.
Greifeld, in Sweden this week to meet with OMX management and shareholders, hinted there could be a strategic reason for dumping the shares. Nasdaq has not ruled out participating in a bid by seven investment banks, including Goldman Sachs Group Inc. and Citigroup Inc., to build a rival European stock-trading platform called “Project Turquoise.”
Nasdaq and OMX could use their technology to help the banks establish the platform, thereby challenging the market dominance of the LSE, Germany’s Deutsche Bourse AG and the New York Stock Exchange. NYSE closed a $14.3 billion acquisition of Euronext, the operator of the Paris, Amsterdam, Brussels and Lisbon exchanges, earlier this year to form the first cross-Atlantic marketplace.
The sale of LSE shares will not go to a single bidder, or a group of bidders “acting in concert,” the Nasdaq said. The London exchange has attracted interest from around the globe — including bids by both Deutsche Bourse AG and OMX.
The LSE fended off Nasdaq’s $5.3 billion offer in March and has since become a buyer itself, picking up Borsa Italiana SpA for $2.19 billion. Nasdaq said it estimated that selling its LSE stake would increase stand-alone earnings per share for 2008 by approximately 30 cents to 35 cents.
Greifeld said Nasdaq would be willing to amend an offer to acquire OMX, but warned it would “maintain our merger and acquisition discipline with respect to both the price and terms of our offer.” Dubai’s $3.96 billion hostile bid is about $355 million more than the Nasdaq’s offer.
“From the conversations we’ve had, there is a strong preference for the Nasdaq approach,” he said. “The combined entity will strengthen the Nordic region, and be an enhanced player on the European stage.”
He also said any takeover of OMX was not “directly threatened in a short- or medium-term way by efforts such as Project Turquoise.”
Nasdaq rose 58 cents to $32.45 in afternoon trading. LSE rose 2.4 percent to 1,301 pence in London trading, while OMX rose 2.2 percent to 237 kronor.
Nasdaq paid about $1.33 billion for its stake in the LSE, and it has produced investment gains of about $333 million because of favorable currency conversions and a near 15 percent increase in LSE shares. JPMorgan Chase & Co. and UBS AG will manage the sale of the stake.
There has also been some speculation that Greifeld will make a bid for a U.S. futures exchange, such as the New York Mercantile Exchange or Atlanta-based InterContinental Exchange Inc. NYSE Group Inc. has also shown interest in acquiring a U.S. futures exchange, and has been said to be in advanced talks with the New York Merc.