Singapore group may buy Nasdaq's stake in LSE

Temasek Holdings, the Singapore government-owned investment agency, has approached Nasdaq to buy its 31 per cent stake, worth £800m, in the London Stock Exchange (LSE), it emerged yesterday.

Temasek is said to have had made the approach in recent days. The Singapore authorities, which recently acquired a stake in Barclays Bank alongside the Chinese government's sovereign investment fund, are believed to see a strategic use for the LSE in their ambition to grow Singapore as a centre for financial services.

Temasek also owns a share of Standard Chartered. A move on the LSE would prompt political criticism, as figures such as the deputy governor of the Bank of England, the German Chancellor and the IMF have expressed concerns about the growth of these large, powerful institutions.

Nasdaq retains a substantial stake in the exchange as a result of its abortive bid for the LSE, which lapsed in February. Nasdaq recently hired UBS and JPMorgan to help sell its holding, thus formally ending its year-and-a-half-long pursuit of the bourse. It will make about £2 a share on the £11 average cost of the holding. Nasdaq is now focusing its attention on sealing its £1.86bn bid for OMX, the Nordic exchange group.

However, Nasdaq exchange company said in a statement earlier this month that it would not sell its London Stock Exchange stake to a single buyer. It had no further comment to make yesterday. Nasdaq will have no shortage of alternative buyers, with or without Temasek taking on some of the equity.

Names mentioned yesterday included rival bourses such as the New York Stock Exchange, the Chicago Mercantile Exchange, Deutsche Börse and Borse Dubai (which is also executing a hostile bid for OMX).

The LSE's £1.1bn merger with the Milan-based Borsa Italiana, announced in June, complicates matters for potential bidders and the London Stock Exchange chief executive Clara Furse will no doubt be relieved that there seems little chance that this deal will be disrupted.

She has seen off one bid from Deutsche Börse already. LSE shareholders recently overwhelmingly voted to back the Borsa Italiana merger, which is expected to complete in October following regulatory approvals and listing of the new shares.

The merger waters down Nasdaq's stake in the enlarged entity to 22 per cent. Regulatory issues would probably hinder a fresh German bid for the LSE, while sources close to the Deutsche Börse suggested that a fresh move is not imminent in any case.