LSE clearance sends shares to fresh high

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London Stock Exchange shares were spurred 14.5p to a fresh high of 774p yesterday after the Competition Commission cleared the way for bids from Euronext or Deutsche Börse.

The country's top competition watchdog re-stated that both the Amsterdam-based Euronext and Germany's Deutsche Börse must safeguard the independence of the payment settlement set-up should either want to bid for their London rival.

For any takeover to be approved by regulators, Euronext would need to cut its 41.5 per cent stake in the LSE's clearing services provider, LCH Clearnet, and reduce the number of Euronext nominees on its board from four to just one.

Deutsche would only need to take action should it supercede Clearnet with a settlement system in which it holds a stake. Any holding in the LSE's clearing provider must remain below 15 per cent, the commission said.

In November, the commission gave conditional clearance to a deal but found that a merger of the London exchange with either European rival "was likely to give rise to a substantial lessening in competition".

The commission is concerned that dominance of London's settlement system by an owner of the LSE would make effective competition for UK share trading business much more difficult.

Interested parties have until 27 February to comment on the proposals. Final agreement should be signed off days after that.

The battle for the LSE, which is headed by Clara Furse, has rumbled on since Deutsche made its first move late in 2004. It was forced to walk away by shareholders who reckoned it would overpay. That cost the job of Werner Seifert, Deutsche's chief executive.

Euronext, which operates the Paris, Brussels, Lisbon and Amsterdam exchanges and has expressed an interest in the LSE, said earlier this week that talks between itself and the Frankfurt-based Deutsche had broken down. The LSE is defending itself against a £1.5bn hostile bid from the Australian investment bank Macquarie.

The offer, pitched at 580p a share, has been rejected by the Exchange and its two biggest shareholders, Threadneedle and Scottish Widows.

Macquarie has less than a fortnight in which to dig deeper into its pockets. Meanwhile, the Australians, led in Europe by Jim Craig, are trying to woo the LSE's customers and shareholders.