OM shares fall puts LSE bid in doubt

OM Gruppen's bid for the London Stock Exchange suffered a further setback yesterday after the Swedish stock market op-erator saw its shares fall sharply on analysts' disappointment at its third-quarter results.

OM Gruppen's bid for the London Stock Exchange suffered a further setback yesterday after the Swedish stock market op-erator saw its shares fall sharply on analysts' disappointment at its third-quarter results.

The shares fell 15 kronor to 365 kronor yesterday. Based on that price, OM's bid is now worth £23.95 per LSE share, valuing the LSE at £713m - more than 15 per cent lower than the current LSE share price of £28.20, which values the LSE at £840m.

Analysts said they were surprised by a bigger than expected charge to cover start-up costs at Jiway, the pan-European retail stock market OM is setting up with Morgan Stanley, the investment bank.

OM has also suffered following reports - vigorously denied by Olof Stenhammar, OM chairman - that the Swedish state prosecutor's office had reopened an investigation into allegations that Mr Stenhammar was involved in bribing Olympic officials in connection with Stockholm's failed 2004 Olympic bid, of which he was chairman.

Mr Stenhammar, who has denied all allegations of wrongdoing, said yesterday that as far as he was aware there was "no formal or informal investigation". However, he said he would welcome a decision to reopen the investigation "because all these rumours can be cleared".

Per Larsson, OM's chief executive, yesterday refuted suggestions that the OM bid was in danger, insisting that the offer still had another 30 days to run. "The bid is not dead. It is the only bid on the table," he said.

However, analysts said that the widening gap between the headline value of OM's mainly for-shares offer and the LSE's share price was clear evidence that the market did not believe there was any chance of the OM bid succeeding.

They say that OM now risks being pulled into a vicious downward spiral where the more it is expected to raise its bid, the more the share price and the value of its bid will fall. OM is offering £7 and 0.65 of a share for each LSE share. Mr Larsson admitted that recent bad publicity was "not helpful". But he insisted that neither the Olympic bid allegations, nor a separate inquiry into alleged insider dealing by the Swedish government into OM shares, had any bearing on OM, its governance, its strategy or the LSE bid.

Pre-tax profits at OM rose by 46 per cent to 569m kronor (£40.6m) in the nine months to the end of September, 2000. But operating expenses were up 55 per cent to 1.57bn kronor.