Business View: The LSE breaks on through to the other side

But can the exchange's American suitors leap the regulatory hurdles?
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The Independent Online

As Jim Morrison famously sang: "This is the end, beautiful friend". The friend in this case is Nasdaq. The end is of the war for the London Stock Exchange.

At 950p a share, or £2.4bn, you have to believe this is a near knockout blow for the LSE. Macquarie couldn't live at much more than 800p. Deutsche Börse was forced out of the party at below 600p. Euronext has the towel in its hand, ready to throw it in.

The only potential rival is the New York Stock Exchange. Morning fresh from its IPO, it is hungry for European exchanges. But is the LSE right for it? The NYSE's chief executive, John Thain, has been throwing hints around like deck quoits. But he seems to want something in derivatives and the LSE is famously rubbish at derivatives.

However, can the largest cash equities market in the US really allow its crosstown neighbour to purloin the largest cash equities market in Europe? Is there another 50p or even £1 in the LSE share price? That's what the LSE board is hanging on for. They might think that 950p a share can be justified on fundamentals, but the big shareholders dare not turn this down. After all, the share price has doubled in a year.

The problem the two US bidders have is regulatory. Nasdaq and the NYSE need structures that give the LSE independence as part of a group holding company, or else the US Securities and Exchange Commission will impose its rules on LSE-listed companies and British stockbrokers. This will ruin London's competitive advantage - an advantage that has won it hundreds of millions of pounds of business in recent months.

Nasdaq thinks it has cracked this. As it is of equal size, it may find it easier to argue that the LSE is independent in this convoluted structure. However, both Nasdaq and the NYSE might find the need for regulatory independence gets in the way of extracting the synergies they need to make the deal pay for itself.

But heck, that's for the American to worry about. At 950p a share, Jim Morrison would have said: "C'mon baby, light my fire".

The Lord loses his halo

Lord Maclaurin of Knebworth is one of the country's most respected businessmen. He turned Tesco from an early version of Kwik Save into the UK's top supermarket, steered Vodafone to world domination and saved English cricket. But as he exits the corporate stage, his halo is becoming tarnished.

The unholy row in the boardroom of Vodafone has reflected badly on him. He is seen as being too close to the ex-chief executive, Sir Chris Gent, and not supportive enough of the new boss, Arun Sarin. This may be because Mr Sarin was not exactly diplomatic about the state of the group when he took over, and Lord Maclaurin may think this reflects badly on him.

Either the good Lord thinks Mr Sarin is not doing the right thing - in which case he should get rid of him - or he should be supportive and use his last few weeks to smooth the transition to the new chairman, Sir John Bond.

And by the way, Lord Maclaurin, you should not accept the £500,000 payoff. It is inappropriate, smacks of greed and you hardly need it.

Italians invade France

Meanwhile, we are about to get one heck of a takeover battle. Italy's Berlusconi government is ready to approve a hostile €50bn (£34.5bn) bid for Suez by Enel, an Italian utility attempting to scupper the all-French tie-up of Suez and Gaz de France.

European Commissioners Neelie Kroes and Charlie McCreevy are ready to cheer Enel on. Everyone outside France wants to see Chirac and co get a bloody nose.

And perhaps the only people with qualms are the poor Enel shareholders. They might find this attempt to bust up the French love-in order to win control of a Belgian business (Enel's real quarry is Electrabel, a monopoly energy supplier in Flanders) an expensive exercise in cross-border deal making.

j.nisse@independent.co.uk

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