LSE votes to keep 4.9% cap on individual stakes

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The Independent Online

Shareholders in the London Stock Exchange yesterday voted to keep the 4.9 per cent restriction on individual stakes, a move which, in effect, kills off the £1bn hostile bid by OM Gruppen, the Swedish stock exchange operator.

Shareholders in the London Stock Exchange yesterday voted to keep the 4.9 per cent restriction on individual stakes, a move which, in effect, kills off the £1bn hostile bid by OM Gruppen, the Swedish stock exchange operator.

The decision was taken at an extraordinary meeting in London yesterday, which saw the surprise appearance of Fred Woollard, the Standard Life carpetbagger, who had been planning to speak in favour of lifting the cap.

Mr Woollard, who has bought just less than 1 per cent of the LSE through Hunter Hall, an Australian fund manager, says the restriction stood in the way of a full stock exchange listing for the LSE. This he believes, would allow it to unlock the true value of the LSE, which he reckons, on the basis of comparisons with the Hong Kong and Australian Exchanges, is worth £100 a share. That would value the LSE at £3bn - some three times what OM is offering.

After the vote, which split 53.3 per cent in favour of retaining the 4.9 per cent limit, and 46.7 per cent against, Don Cruickshank, the LSE chairman, said the decision meant that any bidder needed 75 per cent support to succeed.

Earlier Mr Cruickshank had told the meeting that while the board believed that the LSE needed a period of stability, there was a clear intention to seek a full listing "in due course". Mr Cruickshank took advantage of the meeting to outline plans contained in its third defence document to launch a pan-European exchange going head to head with Frankfurt which, after the collapse of the Anglo-German iX merger plan, has ambitions in a similar direction.

"The third defence document sets out how the London Stock Exchange intends to build its business from the strong foundations that already exist. Beyond these initiatives there are a number of important strategic issues on which full consultation [will be] required before longer-term decisions can be made about participation in European rationalisation and the globalisation of capital markets," he said.

To reinforce the message of cultural change, Mr Cruickshank said that a decision had been taken to vacate the Stock Exchange Tower, in Old Broad Street, by 2004 at the latest for smaller premises in the City. The 500,000 square foot property could fetch up to £110m.

The LSE also announced today that profits, in the half year to 30 September, rose 89 per cent before exceptionals to £29.1m, with margins up from 21 to 33 per cent.

OM, which has called its own EGM for 6 November to vote on another motion to lift the shareholding cap, yesterday sought to highlight the fact that the vote was tighter than the LSE board had hoped and was evenly split.

Magnus Karlsson Bocker, OM executive vice president, said: "The vote was really extremely close. The race is still wide open. It is interesting that they have now adopted our defence and our planning to go head to head with the other European exchanges even though, unlike us, they have no experience of competition."

LSE shares fell 75p to £25.25 yesterday putting the shares 30 per cent below the value of the OM bid.

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