LSE insists it is keen to do deals - but not at Nasdaq's offer price

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The Independent Online

The London Stock Exchange unveiled plans yesterday to return a further £250m to shareholders as chief executive Clara Furse insisted that the exchange was keen to do deals - but not at the level of the Nasdaq's hostile offer.

Speaking as the exchange unveiled its second defence document, Mrs Furse said: "This offer does not even come close [to what the LSE is worth]. It is wholly inadequate. It is a good idea to look beyond this offer and this offer period at the world of opportunity that exists beyond it.

"It has never been our strategy to be independent. What we have been trying to do and what we are still trying to do is ensure that the business is fully understood and properly valued."

She added: "We will look at any strategic opportunity that will add value for our shareholders."

The £250m cash return - through a share buy-back - is more than twice what the City had been expecting and brings the total returned to £974m, more than a third of the company's market value.

Ratings agency Moody's put the exchange on notice that it was considering downgrading its credit as a result, although the rating is only likely to fall one notch as a result of the LSE's "strong cash generation".

However, the shares responded by gaining another 5p to close at £13.16, comfortably ahead of the £12.43 offered by Nasdaq. The US predator now has a week from Saturday to finish making its case. After this time shareholders have two weeks to make their final decisions on the offer.

Mrs Furse also said the exchange had enjoyed a "constructive" dialogue with Samuel Heyman, the US corporate raider who owns more than 10 per cent of the LSE's shares and has been buying at prices above the offer in recent days. While he is a short-term investor, who is widely seen as wanting a deal, this indicates that he does not believe Nasdaq's terms are acceptable.

Mrs Furse said: "We are in exciting times, we see opportunities to add to our growth and business and we will explore these opportunities with interest with the aim of increasing value for our shareholders."

In the document, the LSE attacked Nasdaq for failing to give any idea of the synergies it would extract from a deal. It said these would be worth at least £49m a year before tax, equivalent to 135p a share. Based on comparison with rivals, the document said the offer did not even match the exchange's standalone value and offered shareholders no premium for change of control. The LSE said the arguments advanced for a takeover by Nasdaq were "inconsistent" and "wrong". "Do not let Nasdaq transform itself at your expense," the LSE urged.

In response, the Nasdaq said the LSE had failed to "present any information which changes Nasdaq's belief that without Nasdaq LSE shares would be worth far less." It claimed the LSE failed to provide a long-term strategic vision and described the capital return as "marginal".

The Office of Fair Trading said it did not plan to refer any merger between the two to the Competition Commission.

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