London Stock Exchange faces hostile takeover by Swedish firm

A little-known Swedish company has launched an £822m hostile bid for the London Stock Exchange, sparking the world's first takeover battle for a big stock market.

A little-known Swedish company has launched an £822m hostile bid for the London Stock Exchange, sparking the world's first takeover battle for a big stock market.

The bid from OM Group, a technology company that runs the Stockholm Stock Exchange, threatens to derail the London exchange's planned merger with Germany's Deutsche Borse, which would create a pan-European force.

It could also provoke a bidding war for the London exchange, which is one of the City of London's most venerable institutions with a history going back to the 17th century. Other bidders could include Liffe, the London futures market and Nasdaq, a US hi-tech exchange.

The LSE, which has been struggling to modernise itself in the face of growing competition, rejected OM's approach, saying the offer was "derisory". However, the exchange's chairman, Don Cruickshank, was forced to postpone indefinitely a shareholder vote on the German merger, which had been planned for 14 September.

Olof Stenhammar, OM's chairman, who made an initial approach to the London market on Thursday, said he was puzzled by London's willingness to sell its "crown jewels" on giveaway terms to the Germans. Instead, the former naval commander outlined a vision of a reinvigorated London stock market winning back business in global share trading under Swedish ownership.

The London stock market would be just the latest in a series of historic City institutions to fall into foreign hands. The past 12 months have seen blue-blooded banks such as Schroders and Robert Fleming taken over by American rivals.

However, independent experts said foreign ownership of the Stock Exchange would not affect the importance of London as a thriving financial centre. "Before, the exchange was at the core of the financial community and now it no longer is." said Ruben Lee of the Oxford Finance Group.