The Nasdaq turned tough yesterday, accusing the London Stock Exchange of "milking its dominant position" in an "unsustainable manner" in its latest attempt to win over LSE shareholders.
The US exchange also launched an attack on the LSE's directors, claiming they had placed "independence before shareholder value" and said the LSE's share price would fall sharply if its hostile bid failed.
The latest circular from the Nasdaq provoked a strongly worded response from the London Stock Exchange, which rejected its arguments and accused the Nasdaq of making statements that were "blatantly misleading" and indulging in little more than "bluster".
An LSE insider said: "It's rich to criticise the LSE for not concentrating on shareholder value when anyone wanting to take more than 20 per cent of the Nasdaq has to get their approval. It seems they are getting rattled."
The City bookmaker Cantor Index now makes the London Stock Exchange retaining its independence the 1-3 favourite - the shortest price this has been since the Nasdaq launched its hostile takeover.
In its document the Nasdaq also attacked the LSE's business saying the London exchange "completely fails to acknowledge new competitive threats" such as Project Turquoise, the pan-European share-trading platform being set up by a group of investment banks.
The Nasdaq reiterated its threat to sell its stake in the LSE should the offer fail and claimed it could make money on the 28.85 per cent of the LSE it holds at any price above £11 because the strength of sterling has made its holding worth more.
It also repeated its threat to set up a rival exchange to the LSE in London, although its previous attempt to set up a beachhead in Europe, through the Nasdaq Europe, was a failure.
The Nasdaq insisted its offer represented "full value" for the LSE and said the London exchange's comparison of itself with other exchanges with derivatives arms was "misleading".
However, the Nasdaq's decision to launch a full-scale attack on its target will send relations between the companies to a new low. It will also make the task of integrating the two companies that much more difficult should the Nasdaq succeed by generating hostility among exchange staff and precipitating departures among senior executives, nettled by its comments.
The Nasdaq's bid and tactics have prompted Ken Livingstone, the Mayor of London, to call for the takeover attempt to be blocked, although the Treasury has rejected this.
In the letter, the Nasdaq's chairman, Henry Furlong Baldwin, said: "The LSE defence document and associated comments evidence the LSE's complacency about the impact that customer dissatisfaction, regulatory changes and consolidation will have. LSE shareholders are urged to accept the final offer as you, rather than the LSE board, will determine whether the final offers will be implemented."
However, the LSE chairman, Chris Gibson-Smith, said: "The board believes that Nasdaq's offer does not even give shareholders standalone value. We trust that shareholders will not be misled by Nasdaq's document and urge them to continue to reject this wholly inadequate offer."
The LSE's shares closed down 1p at £12.82. While some hedge funds have sought to short or take profits on their stakes, Heyman Investment Associates, the investment vehicle of US corporate raider Samuel Heyman, said it had increased its stake to 9.96 per cent from 9.65 per cent.
On Friday the US exchange was forced to clarify its position in a statement after a series of reports suggesting it could raise its bid by "a few pennies". The statement is understood to have been demanded by the Takeover Panel, following a complaint by the LSE.Reuse content