LSE shares continue climb as Euronext enters bid war

Clara Furse, the chief executive of the London Stock Exchange, is today meeting her counterparts at the Deutsche Börse and Euronext as the bid battle for Europe's biggest stock market heats up.

Clara Furse, the chief executive of the London Stock Exchange, is today meeting her counterparts at the Deutsche Börse and Euronext as the bid battle for Europe's biggest stock market heats up.

Euronext, which last week hired the investment banks Morgan Stanley and ABN Amro as advisers, confirmed yesterday that it had approached the London Stock Exchange about a possible counter bid to Deutsche Börse's move. The news sent shares in the LSE to a new high of 600p and they closed up 23.75p at 579.75p.

The Paris-based Euronext group, which runs the Paris, Brussels, Amsterdam and Lisbon stock markets, said it had "made an approach to the LSE with a view to entering into preliminary discussions about a possible offer for the LSE". The London Stock Exchange, for its part, said: "The approach is at an early stage and therefore does not require a response at this point."

Sources said it was unlikely that Deutsche Börse and Euronext would launch formal bids for the London market before the new year. The two Continental suitors will flesh out their proposals at separate meetings today, which the LSE's board will consider in coming days, with a response expected early next year. The sources said that the talks would centre on the business model, governance and synergy benefits of a combined company. One source said: "This is not something that's fought out simply over price."

Werner Seifert, the chief executive of Deutsche Börse, has already met Ms Furse last Wednesday after the LSE rejected the German exchange's preliminary offer of £1.35bn as too low. Jean-François Theodore, his opposite number at Euronext, is also understood to have held informal talks with Ms Furse last week.

While rumours circulated that Euronext would top Deutsche Börse's offer of 530p a share with a 600p cash bid, other sources said yesterday that price had not featured in the talks yet. Euronext is expected to take its time before making a formal bid to ensure it is "the right one". The German exchange has sought to reassure the LSE about its "vertical silo" structure, in which it controls the trading platform, clearing transactions and settlement of the eventual contracts. That gives it more pricing power, but Mr Seifert has pledged to honour the London market's existing clearing and settlement arrangements.

Meanwhile, Euronext appears better placed to offer synergies to the LSE as it already owns the UK's derivatives exchange, Liffe.

The LSE illustrated its attraction to potential bidders yesterday by revealing it handled 80 per cent of all western European share issues in 2004.