Euronext set to trump Macquarie's LSE bid

Despite German talks, exchange could offer 600p
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Euronext is still aiming to put in an offer of over 600p a share for the London Stock Exchange despite entering into merger talks with the Deutsche Börse.

This would trump the 580p bid made by Australian bank Macquarie last week and spark a fresh bidding war for the LSE.

The Franco-Dutch exchange's chief executive, Jean-François Theodore, has held meetings with his opposite number at the Frankfurt market, Reto Francioni, in recent days to try to agree a deal. But the talks have been inconclusive and there are obstacles in the way of a merger.

The two groups have shareholders in common who are pushing for a deal, but Euronext has had legal advice that a merger would not be allowed by the European Commission's competition regulators. This is because the two groups have a dominant position in exchange-traded derivatives in Europe.

It is therefore pressing ahead with its plans for an offer for the LSE. This would involve Euronext giving undertakings to sell down its holding in clearing business LCH:Clearnet, from the current 41 per cent to less than 15 per cent.

Shareholders, led by activist hedge fund TCI, are pushing for Euronext to strike a deal with the Deutsche Börse. Last year they scuppered the Börse's LSE bid and forced chief executive Werner Seifert to resign.

Euronext has until late next month to decide whether to make an offer for the LSE. Ironically, Macquarie would be keen to buy Euronext's stake in LCH:Clearnet if it had to be sold.

Macquarie is facing a tighter timetable with its bid. It was forced by the Takeover Panel to say what it was planning, and so put a 580p bid on the table on Thursday. This was immediately rejected by the LSE and its largest shareholder, Threadneedle Asset Management.

Jim Craig, who heads Macquarie's operations in the UK, said he was surprised by the vehemence of the rejection. "What they said, in effect, is, 'we are not for sale', which surprises me. Most people would have had a discussion about price."

Despite the stance of the LSE, Mr Craig said he was hoping to offer jobs to the LSE's chief executive, Clara Furse, and her senior team if Macquarie is successful with its offer.

LSE shares closed on Friday at 617.5p.