Reuters arm plans bid for Exchange

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The Independent Online

Instinet, the share-trading arm of Reuters, is considering a rival bid for the London Stock Exchange (LSE). An offer could be made as early as this week, topping the bid by Swedish operation, OM Gruppen, which is worth nearly £900m.

Instinet, the share-trading arm of Reuters, is considering a rival bid for the London Stock Exchange (LSE). An offer could be made as early as this week, topping the bid by Swedish operation, OM Gruppen, which is worth nearly £900m.

The move would probably be an all-cash offer, overriding the concerns of many shareholders in the LSE over the OM bid, which is largely made up in shares in the Swedish technology company. OM shares have been rising through the week, and closed on Friday at 489 krona. This values the bid for the LSE at £30.34 compared with a closing price for the share of £28.75 on Friday.

It may force the hand of other bidders waiting in the wings. The Deutsche Börse, whose planned merger with the LSE to form iX has been put on hold by the OM bid, has signed up the Milan market and is also in talks with the Madrid exchange about putting together a rival bid.

Frank Zarb, the president of New York market, Nasdaq, was in London last week, and is believed to be also looking at making a bid.

OM will this week try and force the timetable on its bid by putting out an offer document.

OM plans to keep the LSE running as a standalone entity but using technology developed by OM, which already runs markets in Stockholm, New York and Toronto.

Its move has been welcomed because of the effect it has had on the LSE, which has put off the vote, due on 14 September, to approve the planned merger with Frankfurt. It is meeting shareholders and interested parties in coming weeks.

However, the OM bid is not expected to succeed. "They are going to have to put a lot of money on the table before we sell out," said Brian Winterflood, whose Winterflood Securities is one of the biggest traders on the LSE. and is a shareholder.

OM has signalled it is deadly serious about this offer. Peter Cox, who runs the group's London office, said the company did not make the bid just to spoil the iX merger - it expected to win.

Instinet, which is run by Doug Atkin, is set to be spun out of the financial information group next year in a float valuing it at £5bn. It is already a backer of the LSE's main rival, Tradepoint.

However, the slow progress of Tradepoint in winning business may tempt Instinet into making its own bid.

Tradepoint is generally accepted to have better technology than the LSE and, following a link with the Swiss Stock Exchange agreed in July, now has heavyweight backers.

But the strength of the LSE brand and the liquidity in the market has enabled the Exchange to hold on to more than 97 per cent of all the trading in British shares.

If there are rival offers to the OM bid this could stretch out the timetable to decide on the future of the LSE, on which no final decision expected to be reached before Christmas.

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