Jeremy Warner's Outlook: The Europeans have tried, and so too have the Aussies. Now the Americans take a turn

On the water front: Dubai ports disaster; A wizard wheeze for the Chancellor
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The Independent Online

The whole world, it seems, wants to buy the London Stock Exchange. Having seen off the Germans, the French, and most recently the Australians, Clara Furse, the chief executive, might naively have thought she deserved a rest. Somewhat belatedly, the Americans have suddenly come riding over the hill. To her, it can't seem like the arrival of the seventh cavalry.

She's rather grown into the role of plucky little independent, and Nasdaq's attentions are most unwelcome. Nor is it likely to stop with Nasdaq. John Thain, chief executive of the New York Stock Exchange, has made little secret of his desire to acquire European stock exchange assets. Newly listed, he's got all the fire power be needs and is hot to trot.

This presumably explains why Robert Griefield, chief executive of Nasdaq, didn't bother with the courtesies of a friendly merger approach before dropping his 950p a share bombshell.

On this newspaper, we had had a sniff of Nasdaq's renewed interest earlier this week. What we couldn't figure out was why there had been no attempt to secure the LSE's agreement. But it would be too much of an invasion on private grief to explore in any further detail a great scoop missed.

With the news beginning to leak, Mr Griefield had to move fast. He'd already lost his established financial advisers, Citigroup, to the NYSE. Greenhills and JP Morgan were hurriedly brought on board instead. The NYSE would eventually make its own bid, Mr Griefield figured; the best strategy was to strike while the NYSE is still too newly listed to feel comfortable with making another strategic acquisition.

Yet if he thought the LSE would just roll over and let its tummy be tickled, he had another think coming. The LSE is now a veteran of these largely unwanted takeover approaches, and having just seen off Macquarie Bank of Australia, already has its defences fully marshalled.

At 950p a share, the price is much more in the right ball park than the insulting 580p offered by Macquarie. Yet even ignoring the regulatory issues involved, which are daunting, it's still unlikely to be enough. Stock exchanges have been some of hottest investment properties around in recent times. Bizarrely, given that everyone seems so keen to buy the company, the LSE's share price doesn't yet properly recognise this rerating.

Since December 2004, the LSE share price has roughly double, yet this pales alongside the performance of others. Deutsche Börse shares are up 132 per cent, Euronext has appreciated 142 per cent, while Nasdaq is up an astonishing 549 per cent. Shares in the NYSE meanwhile gained 30 per cent on their first day of trading.

As it is, price is only half the battle. The regulatory issues on which merger talks between Nasdaq and the LSE foundered last year remain largely the same.

If the merged company were to move to a common trading platform, which logic would dictate is the best way of getting the greatest possible synergies, a battle royal would break out over which financial regulator - the US Securities & Exchange Commission or the British Financial Services Authority - would have jurisdiction.

It would plainly be unacceptable for the vast bulk of companies listed on the LSE to fall under the SEC's control. Indeed, it is to escape the oppressive and costly requirements of the SEC that many of them chose to list in London in the first place.

If on the other hand the two markets were to be run separately - which I am told is the intention - many, though not all, the synergy benefits would be lost. A separate concern would be the loss of effective competition between the two markets for listings, as there is plainly no sense in having competing businesses under the same umbrella.

On the water front: Dubai ports disaster

It's hard to imagine a more pathetic, ham-fisted, counter productive or dangerous piece of protectionist posturing than that just demonstrated by the US Congress over Dubai's acquisition through P&O of a handful of US ports.

The row in Europe over the creation of national champions to frustrate foreign takeovers in the utilities sector pales to insignificance by comparison. There may or may not be some justification for wanting to protect a nation's energy supplies from the profiteering intentions of foreign predators; there is no similar excuse for what's happened in the US.

To the outside world, the concerns voiced over national security look like just a fig leaf for an overtly racist outbreak of paranoid isolationism. The double standards being applied at a time when the US is trying to "impose" democracy on the Middle East and globalisation on the rest of the developing world are quite breathtaking in their hypocrisy.

As it turns out, the great bulk of terminals at US ports are managed by foreign firms, a natural result of the system whereby shipping lines tend to have their own facilities in each port for cargo handling purposes.

What does the US Congress now intend to do? Strip all these firms of their right to manage the terminals, from China to South Korea, Denmark and Taiwan? If the Maktoums of Dubai, the owners of DP World and in every other respect staunch allies of US interests, are to be excluded, presumably all these other foreigners must go too.

What that would do to world trade, and more pertinently, what it would do to the mass of cheap, imported goods which at present sustain the US's economic health hardly bears thinking about. As it is, the consequences of this outbreak of economic and political insanity could still be profound.

The Maktoums are behaving with characteristic courtesy and honour in calming the situation by volunteering to sell the ports to a US entity.

Perhaps oddly, the only other party to emerge with any credit from the affair is President George Bush himself, who we have to believe would have used his veto to block Congress's frustrating tactics had DP World not come to his rescue and made the veto unnecessary. We can only speculate on what favours might have been promised for this act of charity.

As for the Democrats, their behaviour in seeking to make political capital out of the affair is quite unforgivable, whether or not their intention was merely to expose the anomalies and injustices of homeland security. If the US doesn't allow its friends in foreign climes access to American markets, what hope for us in seeking access to the fast-growing markets of the developing world?

DP World has acted with commendable altruism in defusing such a potentially explosive situation, but the cause of globalisation has none the less been dealt a severe blow. What on earth do these senators and congressmen think they are playing at? The global trade and financial system is fragile enough as it is. Just five ports - it's a small thing really. Yet I fear for the consequences of this outbreak of xenophobic protectionism.

A wizard wheeze for the Chancellor

You might not have noticed it, but the Chancellor is perilously close to breaching one of his rules governing financial prudence in the public finances. No, not the golden rule, which thanks to an improvement in the tax take looks relatively safe for the Budget the week after next. Rather I'm referring to the rule that national debt mustn't be more than 40 per cent of national income. Thanks to the ONS's reclassification of the Channel Tunnel Rail Link as public debt, the big number has already risen to 38.6 per cent. Any attempt to do the same to Network Rail would just about get us there.

Perhaps I'm just an old cynic, but I've thought of a wizard wheeze to deal with this problem which the Chancellor might like to take on board. By helping create the gilts bubble, the Chancellor has driven down interest rates to a level not seen for a generation or more. If he were to declare that adjustment "permanent", he could both reduce the notional cost of the national debt and justify a bigger one at the same time, as the debt wouldn't cost as much to finance. But then the Chancellor surely wouldn't be shameless enough to attempt such a device, would he?

j.warner@independent.co.uk

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