The London Stock Exchange is to pursue talks aimed at a tie-up with its Japanese counterpart after the failure of Nasdaq's bid over the weekend.
The talks with the Tokyo Stock Exchange are part of a strategy of broadening alliances with other global exchanges. Clara Furse, the UK market's chief executive, is also believed to be in talks with the Bombay Stock Exchange about a collaboration and to be keen on a deal in China.
Analysts suggested a move abroad could see the LSE take a stake in India's stock market. However, this form of tie-up is unlikely in Japan because the exchange is still owned by its members, something that is not expected to change until 2009.
Any major deal involving the UK market will need the support of Nasdaq. The US exchange retains a 28.75 per cent stake in the LSE, which will rise to more than 30 per cent once the LSE initiates its share buy-back programme. Sources close to Nasdaq said it is likely it will prevent the LSE doing a deal elsewhere.
In its quarterly results statement tomorrow, Nasdaq is expected to highlight the attractiveness of its holding in the LSE on a standalone basis. It bought most of its shares for 1,175p. Nasdaq has profited not only from the rise in the value of LSE shares - they closed at 1,282p on Friday - but from a hedging arrangement on its pound/dollar exposure giving it an effective purchase price of around 1,100p.
On Saturday, the US exchange revealed that just 0.4 per cent of the London market's shareholders had accepted its 1,243p-a-share offer. It needed acceptances from at least 22 per cent. Bob Greifeld, Nasdaq's chief executive, is now prevented by takeover rules from tabling another offer for 12 months.
Over the weekend, the LSE poured scorn on Nasdaq's bid. Meanwhile, Mr Greifeld said he was "disappointed" at the outcome but insisted that his final offer was a full and fair price for LSE shareholders and that he was glad he had not overpaid.
Responding to the LSE's plans to forge ahead with talks aimed at an alliance in Japan, a spokesman for Nasdaq said: "All exchanges in our space talk to each other all the time. These good things do not, however, represent the major leap forward that combining Nasdaq with the LSE would have represented."
The LSE will now enjoy its longest period away from the pressure of a possible takeover since December 2004 when Deutsche Börse tabled a 530p offer. Soon after, Clara Furse held talks with Jean-Francois Theodore, the chairman and chief executive of Euronext, about a possible merger. Then in December 2005, Macquarie, the Australian bank, tabled a 580p bid. This offer failed as the LSE share price started to soar amid speculation of a transatlantic bid.
Samuel Heyman, the US corporate raider, paid more than 1,200p a share for his 10 per cent stake. Analysts estimate the price he paid for his stock will rise by 7p a share every month because he borrowed a large chunk of the money to pay for his position.Reuse content