Merrill Lynch resigns as Exchange adviser

Merrill Lynch yesterday resigned as adviser to the London Stock Exchange, three days before the Exchange publishes its defence against the hostile takeover bid launched by OM Gruppen, the Swedish stock exchange group. The move follows last week's collapse of the iX merger deal with Frankfurt.

Merrill Lynch yesterday resigned as adviser to the London Stock Exchange, three days before the Exchange publishes its defence against the hostile takeover bid launched by OM Gruppen, the Swedish stock exchange group. The move follows last week's collapse of the iX merger deal with Frankfurt.

The firm has also been severely criticised for agreeing to work as an adviser, given that Michael Marks, Merrill's most senior executive in Europe and an advocate of the iX deal, was sitting on the LSE board.

Merrill was also believed to be suffering serious internal divisions about its role. These came to the surface with the publication of a leaked internal document highlighting concerns within its equity division about the iX deal.

Merrill said yesterday thefirm wanted to "take the heat out of the situation". Guy Dawson, chairman of investment banking, said: "We believed that our position was entirely reasonable but in the end perception is what counts in the interest of the client." Mr Marks will remain on the LSE board.

Senior executives from Euronext, the rival European stock exchange grouping that came into existence officially yesterday, said after an inaugural board meeting in Amsterdam that they would be looking for signs in Monday's LSE document about how the LSE intends to deal with the many strategic options before it.

Oliver Lefebvre, secretary general of Euronext, which was formed out of the French, Dutch and Belgian exchanges, said: "I think we should see what will be the rule of the game... Are we in a pure takeover situation? Is London going to take a proper comparison of various offers?"

As well as Euronext, which has been working on a merger proposal, Deutsche Börse has been talking openly about structuring a broad-based offer involving Madrid and Milan and possibly Nasdaq, the US hi-tech exchange. LSE chairman Don Cruickshank had, as of yesterday, not responded to an offer from the chairman of Liffe, Brian Williamson, for talks about a technology alliance.

Soundings among LSE shareholders indicate there is little support for the OM bid and very little chance of Deutsche Börse pulling off an unsolicited offer.Shareholders still believe London needs to be involved in pan-European consolidation but on terms which reflect its importance as the leading financial centre. Edmond Warner, chief executive of Old Mutual Securities, said: "It is the crown jewels."