Euronext set to show its hand with offer for LSE

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The Independent Online
Euronext, the Franco-Dutch stock exchange, is to break cover this week and say it is ready to make an offer for the London Stock Exchange. However, unlike its rival Deutsche Borse, which has said it will pay 530p a share, valuing the LSE at pounds 1.3bn, Euronext is not going to say how much it will pay.

Jean-Francois Theodore, Euronext's chief executive, is understood not to want to announce a figure so as to avoid getting into a bidding war with Deutsche Borse, which runs the Frankfurt stock exchange. But it is understood that Euronext has the finance set up to pay substantially more than the 530p Deutsche Borse has put on the table.

Analysts have speculated that Euronext could pay 580p a share. LSE shares closed at 564p on Friday.

Euronext is convinced that what it will announce this week will deal with many of the regulatory issues flagged by City regulator the Financial Services Authority (FSA), and the London Investment Banking Association (Liba), which represents many of the LSE's users.

The FSA raised concerns about foreign ownership of the LSE. Euronext will say that it will run all its cash equities operations from London with a separate London-based board and an LSE listing. It will also agree to be bound by the Combined Code - the template for corporate governance in the UK.

Deutsche Borse has said it will run the UK business from London but is under pressure to keep its main management in Frankfurt.

Euronext will deal with Liba's concerns about costs of trading, settlement and clearing, as well as ownership of clearing and settlement businesses. It will say that although it is a major shareholder in LCH.Clearnet, LSE traders will be free to use the existing clearing system, CrestCo, which is owned by Euroclear.

Deutsche Borse has been criticised because it owns a clearing business, Clearstream. However, it has said it will not force LSE customers to use it and will honour existing contracts with CrestCo.

Euronext is hoping to persuade the LSE to recommend its offer, but has not ruled out the possibility of making a hostile bid if needs be.

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