Frankfurt poised to make £1bn counterbid for LSE

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The Independent Online

Deutsche Borse, the Frankfurt stock exchange, is poised to launch a £1bn counter-bid for the London Stock Exchange in order to keep its plans for the iX Anglo-German stock market alive.

Deutsche Borse, the Frankfurt stock exchange, is poised to launch a £1bn counter-bid for the London Stock Exchange in order to keep its plans for the iX Anglo-German stock market alive.

It follows the publication yesterday of the offer document for the hostile £848.5m cash and shares bid for the LSE by OM Gruppen, which runs the Swedish stock exchange.

Plans for the counter-bid from the Deutsche Börse are believed to have been discussed at the meeting of its supervisory board in Frankfurt yesterday.

Following the meeting, which decided to postpone indefinitely a shareholder vote on the iX merger plan scheduled for Thursday, Dr Rolf Breuer, the chairman, said that the German exchange was "keeping all options open".

He said: "The merger of Deutsche Börse and London Stock Exchange is still the most attractive option from Deutsche Börse's point of view. We can now realise the vision of a European capital market that has been called for by all sides for such a long time and rightly so."

Well-placed observers said last night that this statement was intended as a clear signal that the Germans were preparing to table a full takeover bid within the next few days.

The board of the German exchange also confirmed it was extending the contract of Werner Seifert, its chief executive, until 2006, to damp down speculation that Mr Seifert could lose his job over the iX merger debacle.

OM's offer document yesterday also detailed its plans to seek "an alliance" with Liffe, the London derivatives exchange. The plans are in response to calls among smaller City stock brokers for Brian Williamson, the highly popular Liffe chairman, to become involved in the campaign to halt the Anglo-German iX deal.

OM is offering 0.65 of its own shares and £7 in cash for each LSE share and has carefully reserved the right to raise it in the event of a counterbid. The document also reveals that, under a licence agreement which lasts until 2005, OM's chairman, Olof Stenhammar, is entitled to a 1 per cent share of the group's net income after financial items on top of a salary of 700,000 kronor (£53,000). That would have been worth £460,000 last year and is likely to more than double if OM succeeds in its bid for the LSE.

The publication of the OM document, which starts the clock on the formal City takeover panel bid process, is seen as clearing the way for counterbids. As well as Frankfurt, Euronext, the rival grouping of the Amsterdam, Paris and Brussels exchanges, and Instinet, Reuters' broking arm, have been looking at bidding either on their own or in partnership.

Dr Breuer raised the prospect of a counterbid immediately after OM stunned the City with its hostile bid and forced the London Stock Exchange to shelve its plannedshareholder vote on the iX merger. He has held discussions seeking support for a counter-bidwith the Madrid and Milan stock exchanges, which were due to join the iX deal next year.

Nasdaq is also believed to have been involved in the talks.The American technology exchange has signed a deal with iX that would involve it setting up a new pan-European technology stock market. Industry sources last night saidDresdner Kleinwort Benson, the investment bank, had been working with Nasdaq on its options.

Any counter-bid would have to involve a significant cash element to provide stockbrokers opposed to the iX deal with an exit. However, there is already £200m in cash on the LSE balance sheet. The Deutsche Börse shelvedplans for a public listing when it entered merger talks with London in the spring.

Per Larsson, OM's chief executive officer, meanwhile said OM planned a series of UK-wide briefings with LSE members to try to convince them that it alone offered the "clarity and dynamism" to regain London's position as the main home for secondary trading and for initial public offerings. He said the iX merger would "squander London's potential" and cede control of lucrative technology IPOs to Frankfurt.

Don Cruickshank, the LSE chairman, dismissed the OM bid as a "cul-de-sac" for the London market.

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