Seifert comes out fighting in defence of his LSE bid

Deutsche Börse sought to stave off a growing shareholder revolt over its bid for the London Stock Exchange by outlining its benefits while also announcing dividend increases and a share buyback.

Deutsche Börse sought to stave off a growing shareholder revolt over its bid for the London Stock Exchange by outlining its benefits while also announcing dividend increases and a share buyback.

At a presentation of Börse's annual results, Werner Seifert, the chief executive, said: "We are confident that our strategy combining the takeover of the LSE with further dividend increases and a share buyback ... is more attractive than a pure distribution (of excess cash)." He added "I am sure we can convince our shareholders."

Two rebel shareholders, the Children's Investment Fund (TCI) and Atticus Capital, have made clear their opposition to the LSE bid, fearing that Börse would overpay, and have argued Börse should return around €500m of its cash to shareholders. They told Börse this week that a majority of investors opposed its £1.3bn bid for the London market and threatened a vote to oust Börse's supervisory board at the next shareholder meeting on 25 May. TCI and Atticus have also raised their stakes in Börse to about 7.3 per cent and more than 5 per cent respectively.

Under German law, shareholders are not allowed to vote on the proposed bid so the only way to express their opposition would be to vote on the removal of Börse's supervisory board. Such a vote would require the backing of 50 per cent of shareholders by value to win.

The LSE has twice rejected the German exchange's indicative bid of 530p a share as too low. Mr Seifert yesterday called it a "rich price" and said he saw no reason to raise it, especially as Börse's rival Euronext had not yet put a price on its offer. He noted that the LSE share price had been trending lower in recent weeks after hitting a record high of 600p.

Christopher Hohn, managing partner of TCI, on Monday wrote a letter to Rolf Breuer, the chairman of Börse's supervisory board. He accused him of not relaying the views of dissident shareholders to his fellow board members, alleging a personal conflict of interest. Mr Breuer is also chairman of the supervisory board of Deutsche Bank, which stands to gain from the bid as it would help finance the takeover and is also a large LSE shareholder, with a 6.8 per cent stake.

Börse said yesterday it was considering buying back around €200m of shares this year, and raised its dividend by 27 per cent to €0.70 a share. It unveiled record annual results, with earnings before interest and taxes up 1 per cent to €458.7m.

The next step in the LSE takeover battle is the decision by the Office of Fair Trading on the Börse and Euronext bids.