LSE accuses Nasdaq of 'failing to share' benefits of proposed deal

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The Independent Online

The London Stock Exchange hit back at the Nasdaq yesterday, urging shareholders not to let the US exchange "transform itself at your expense".

The London exchange also pledged to raise its dividend by 50 per cent and said it would grow earnings by 58 per cent. The forecast full-year 2007 dividend is 18p a share.

The LSE chief executive, Clara Furse, said the number of professional terminals receiving exchange data surged to a record 120,000 by the end of last month. And the exchange accused the Nasdaq of "failing to share" the benefits of putting the two companies together with its £12.43-a-share, £2.7bn bid.

In its defence document, the LSE said "the average estimated pre-tax value of synergies" was £51m, which equated to 140p a share. But it said: "Nasdaq has not put a value on the synergies it expects to achieve through this transaction as it does not plan to share them."

The London exchange also said the surge in its profits meant Nasdaq's current offer was at a lower multiple to its earnings than the US exchange's first rejected takeover attempt at 950p a share in March.

The LSE said the bid was worth 24.7 times its forecast earnings compared with 29.8 in March, far lower than the 47 times 2006 earnings Nasdaq currently trades on and below the sector average of 37.3 times earnings.

Ms Furse also dismissed the Nasdaq's argument that the LSE is facing an increased competitive threat from the likes of Project Turquoise, the pan-European trading platform planned by seven investment banks.

She said: "We have been in a competitive market for five years and have increased the amount of trades going through SETS [the electronic trading system] to 65 per cent despite investment banks internalising their trades.

"Competition improves the quality of the market, and that in itself makes the market bigger. We are currently getting a bigger share of a bigger market."

Ms Furse said the exchange had been talking to its second biggest shareholder Samuel Heyman, the US corporate raider who on Monday bought another million LSE shares at well above the Nasdaq's offer. But she would not give details.

LSE shares eased 7p to £13.10, but Nasdaq shares fell by as much as 6 per cent in the US, dipping below $34 for the first time in months.

For the first time, Nasdaq directly attacked the LSE's director. Chief executive Bob Greifeld said: "The board of the LSE is ignoring the elephant in the room at its peril. Its recent growth in revenues has taken place without a proper sharing of benefits with users. There is nothing in the circular which changes our view on value."

Nasdaq disputed the LSE's arguments on valuation, saying its multiple would be down to 23.1 in 2007.

Separately, Keith Loudon, senior partner of stockbroker Redmayne-Bentley, an LSE shareholder, said he had written to the Governor of the Bank of England to appeal for him to intervene to prevent the Nasdaq bid.

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