Nasdaq bids for London market

NEW YORK - The Nasdaq stock market has offered to buy the London Stock Exchange for US$4.1 billion ($6.4 billion) to create the first transatlantic stock market.

If successful it would create a market with more than 6000 listed companies with a total value of US$7.3 trillion.

The London exchange has rejected the bid, the third approach it has spurned in 15 months. In 2004 the German exchange, Deutsche Boerse, tried and failed to take it over and just last month Australia's Macquarie Bank gave up on its hostile bid.

Nasdaq said it made an "attractive offer" of £9.50 ($25.50) a share in cash and wanted to hold discussions with the London board.

But the bid - 8 per cent higher than Friday's closing price of £8.80 - "substantially undervalues the company", the London exchange said.

A combined Nasdaq and London exchange (LSE) would create a single marketplace for stocks such as Microsoft and BP, and could give foreign companies a way to tap American investors without having to meet US regulatory requirements.

"It's a good deal for LSE shareholders," said David Dodds, an analyst at SVM Asset Management in London.

Nasdaq shares jumped after the London exchange revealed the bid just before noon on Friday New York time. The offer was disclosed after the close of London trading.

LSE chief executive Clara Furse has already rejected two bids for Europe's largest equity market.

In 2004 Deutsche Boerse offered £5.30 a share, a proposal the London exchange spurned that December. Australia's Macquarie Bank made a £5.80 bid three months ago that the LSE said was "derisory".

Last month, the LSE said it would double a cash dividend to £510 million and buy back stock. That helped Furse to gain shareholders' support and turn away Macquarie.

The LSE said Nasdaq's offer, which is 64 per cent higher than Macquarie's, undervalues its "unique position and the very significant synergies that would be achievable from the combination of London Stock Exchange with any major exchange".

The bid is 35-year-old Nasdaq's second attempt to combine with the LSE, which traces its roots to 1698.

Talks between the two, involving Nasdaq's then-chief executive Hardwick Simmons, broke down in 2002 after US and British regulators failed to agree on how to oversee the combined market.

"You have regulatory issues because there are two bodies overseeing each exchange, but it's not a deal-killer," said Richard Repetto, an analyst at Sandler O'Neill & Partners.

"It's something they will have to navigate."

Nasdaq said a single market would cut costs by combining trading systems and give issuers the ability to list shares in both London and New York.

"The more securities you can get on a single platform, the more money you make," said Benn Steil, an expert on exchanges at the Council on Foreign Relations in New York.

The offer gives Nasdaq chief executive Robert Greifeld a jump on NYSE Group's John Thain, who last week said his next step for the New York Stock Exchange would be international expansion.

- BLOOMBERG