Macquarie fires opening shot in bid for London Stock Exchange

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The Independent Online

Macquarie, the acquisitive Australian investment bank that has been stalking the London Stock Exchange for the past three months, started talks yesterday with Exchange bosses to discuss a possible offer.

Jim Craig, the head of Macquarie's European operations, floated the idea of a 580p cash bid for the LSE to its chief executive, Clara Furse, and asked to see the books in the brief meeting.

That price is markedly off yesterday's 612p close by LSE shares, but is a hefty premium to the level before a first potential suitor, Germany's Deutsche Börse, declared its interest a year ago. Macquarie's approach, which values the LSE just shy of £1.5bn, is only an opening salvo to kick-start discussions. It is highly unlikely to cut much ice with either the LSE's management or shareholders.

The LSE was expected to snub Macquarie's approach this morning. Nor has the Exchange handed over its financial records for scrutiny. Most analysts agree the Exchange, bid premium aside, has a fair value of somewhere north of 600p.

Earlier this week the fund management group Threadneedle - the LSE's biggest shareholder with more than 12 per cent of the company - snapped up 100,000 shares at 612p. Its second-biggest shareholder, Scottish Widows, has also bought heavily above the 600p level recently.

Some in the City suggested that yesterday's approach may be a precursor to Macquarie walking away or a tactic to buy more time to put together a formal bid. The Takeover Panel, which monitors mergers and acquisitions in the City, has given Macquarie until next Thursday to put up or shut up.

That prompted Macquarie to imply last month it may abandon bid plans. The bank said the rapid rise in the Exchange's shares since its interest was made public in August, made "any assessment of the fundamental value of the LSE increasingly challenging".

Euronext, the Paris-based bourse, has also expressed an interest its London rival, but its attentions are stymied for time being by regulatory issues.

For its part, the LSE has repeatedly stated that it wants to remain independent. But it is widely thought the LSE would readily seek a tie-up with the Scandinavian exchange group OMX should a takeover from Macquarie look likely.

The LSE has spoken to OMX about a link in the past and is reportedly mulling whether to reopen negotiations in the new year.

Magnus Bocker, the head of OMX, fuelled rumours of a tie-up recently when he recently told a Swedish newspaper: "I can see a logic in the rumours about OMX and Euronext and the LSE. I cans see a logic in several constellations creating added value for both their clients and their shareholders."

The LSE itself and many of its smaller customers are highly wary of a takeover by Macquarie. The bank has a track record of hiking charges for customers in a captive market.

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