Nasdaq pulls out of bid for London Stock Exchange

Nasdaq ditched its £2.4bn bid to buy the London Stock Exchange yesterday, becoming the third hopeful bidder in recent times to walk away empty handed.

London Stock Exchange's chief executive Clara Furse has now seen off formal approaches from Deutsche Börse, Macquarie Bank and Nasdaq, as well as rejecting any number of informal bids.

Nasdaq left the door open to return with another bid if the LSE itself makes an acquisition or tries to merge with another party - standard clauses under Takeover Panel rules.

LSE shares fell 76.5p to 1,043.5p as hopes of an immediate bidding war faded. The US high-technology exchange quit its pursuit after finding almost total resistance from the LSE board.

Nasdaq, whose president and chief executive is Bob Greifeld, briefly toyed with launching a hostile takeover offer, before deciding that without the support of Ms Furse and others, it was doomed to fail.

Its offer was pitched at 950p a share. The LSE share price quickly soared past this level as investors re-evaluated the worth of a business that is admired the world over.

LSE said the Nasdaq offer "substantially undervalues the company". At least two investors, Threadneedle and Scottish Widows, were keen to at least discuss a bid at this level, but recent price moves left Nasdaq's offer looking mean. Nasdaq was advised by Greenhill, the boutique investment bank.

The LSE had no comment yesterday. The New York Stock Exchange said it had noted the statement from Nasdaq but declined to clarify its own intentions. It is widely thought to be considering its own bid for the LSE and has asked bankers at Goldman Sachs to structure a possible deal.

Mergers in the stock market sector seem inevitable. Investors want share-dealing costs to be cut and one way is to pool liquidity and merge trading platforms.

The LSE, which still insists publicly that it intends to remain independent, has promised to return £510m in cash to shareholders.