LSE gives thumbs down to Swedes

Om Gruppen, the Swedish stock exchange group, appeared last night to have failed to inject new life into its flagging bid for the London Stock Exchange as shareholders queued up to reject a higher offer valuing the LSE at £983m.

Om Gruppen, the Swedish stock exchange group, appeared last night to have failed to inject new life into its flagging bid for the London Stock Exchange as shareholders queued up to reject a higher offer valuing the LSE at £983m.

OM raised its offer by 53 per cent to £34 a share and increased the cash element. But influential shareholders said that the latest offer, which would increase the LSE's shareholding in the enlarged OM from 18 to 33 per cent, did not change their fundamental view that the LSE was not for sale.

Michael Spencer, chief executive of Garban-Intercapital, the dealer broker, said: "There is a sufficient atmosphere that the LSE should be allowed to get its act together with its go-alone strategy that [the offer] would have to be well north of £40- or £50-a-share to stand a chance of succeeding."

His views were echoed by Brian Winterflood, of Winterflood Securities, the leading small companies broker, who said: "Thirty-three per cent is better than 18 per cent but this will not win the day. This is the best stock exchange in the world. Let's not lose it."

Angela Knight, chief executive of Apcims, the retail stockbroking group, which speaks for 30 per cent of Stock Exchange votes, added that the offer "misses the point for most shareholders". UBS Warburg, which owns more than 3.8 per cent of the LSE, also said the revised offer did not change its view that the LSE would be better off merging with Euronext, the pan-European exchange grouping the Paris, Amsterdam and Brussels bourses.

The clear lack of enthusiasm for the OM bid was reflected in the behaviour of the LSE share price. After jumping nearly 10 per cent at the opening, LSE shares fell back to £28.20, a rise of 6.8 per cent. At that level the shares were still trading a full 20 per cent below the OM offer price, indicating widespread scepticism about the chances of the bid succeeding.

Based on Thursday's closing prices, OM's offer was worth £35.3 or 57 per cent more than the value of the previous offer.OM shares fell 14 kronor to 355 kronor yesterday cutting the value of the LSE bid to £34 share. OM shares have already fallen from a peak of 450 kronor as doubts about its chances of winning have mounted.

Yesterday's revised terms give LSE shareholders the choice of a paper-only offer of 1.4 OM shares or a cash alternative worth £20 in cash and 0.5 OM shares, worth £32.15 in total.

The improved offer comes six days before a meeting of LSE shareholders at which they had been expected to vote to retain the 4.9 per cent limit on individual shareholdings. This would, in effect, scupper the OM bid.

Per Larsson, OM chief executive, who has toured regional centres in the UK and Ireland in a vain attempt to drum up support for the bid, insisted the timing of the move had nothing to do with the decision of the LSE to call the meeting a day before day 39 - the last day on which the LSE is allowed under the City takeover code to reveal new information to help its defence.

"The LSE is at a crossroads. Shareholders have to make a choice. They have told us that they do not believe that the LSE can go it alone," he said.

Edmond Warner, chief executive of Old Mutual Securities, warned that while the current mood of LSE shareholders was such that OM's bid was unlikely to succeed whatever the price, this should not be taken as an endorsement of a go-it-alone strategy for the exchange.