Stock Exchange rejects £802m approach from Swedish OM

The London Stock Exchange yesterday rejected an £802m takeover approach from OM Gruppen, the Swedish-based operator of the Nordic stock exchanges, saying that the offer was significantly less attractive than its proposed merger with the German stock exchange, Deutsche Börse.

The London Stock Exchange yesterday rejected an £802m takeover approach from OM Gruppen, the Swedish-based operator of the Nordic stock exchanges, saying that the offer was significantly less attractive than its proposed merger with the German stock exchange, Deutsche Börse.

Don Cruickshank, the LSE's chairman, yesterday urged shareholders not to be distracted by what he described as a competitive spoiling tactic, and promised that a major initiative on settlement would be unveiled early next week.

OM approached the LSE on Thursday with a proposal consisting of £20-worth of OM shares and £7 in cash for each LSE share. The LSE's shares, traded privately by Cazenove, last night closed at £23.50. OM, which is listed listed in Stockholm, ended at SKr419, valuing it at £2.5bn.

"We have no hesitation in rejecting OM's approach which we believe is significantly less attractive than our proposed merger with Deutsche Börse to create iX-international exchanges," Mr Cruickshank said last night.

"For our shareholders, the offer value is derisory. For our customers, the proposal fails to provide the benefits which will arise from achieving critical mass in European securities."

"We urge shareholders and our customers not to be distracted by [the OM] approach which amounts to no more than a competitive spoiling tactic," Mr Cruickshank added last night.

Mr Cruickshank continued to urge the LSE's investors to back the merger with the German exchange. The vote on the merger is set for 14 September in both Frankfurt and London, and three quarters of LSE shareholders must approve the tie-up.

A series of polls, however, have suggested that the proposal may fail to secure sufficient support among LSE shareholders, while calls to delay, or oppose, the vote have become more strident. Mr Cruickshank continued to reject calls for a delay yesterday, describing many of the merger plan's opponents as "quite narrow constituencies".

"I am really very confident that on 14 September, we shall win the vote," Mr Cruickshank, who is also chairman-designate of iX, said. "These [brokers who are in disagreement, or are calling for a delay] are quite narrow constituencies. Most of our shareholders are not participating in this at all."

Mr Cruickshank also said yesterday that Crest, the UK settlement group, and Clearstream, its German counterpart, would unveil a plan next week that will enable UK brokers to trade in German shares without having to deal with the German settlement system, or pay high fees. The settlement alliance may help to diffuse growing opposition among smaller City brokers to iX.

"The important thing here is cost," Mr Cruickshank said. "What next week will do is make it possible for a broker in London to trade German stocks for the same price, if not cheaper, as UK stocks ... and vice versa."

Under current arrangements, UK brokers settle trades in German equities by paying a fee to a German firm that has an account with Clearstream.

Under the proposed arrangement, UK brokers will be able to trade German equities using their existing settlement technology, without the expense of buying in new systems. By the same token, German brokers will be able to settle trades in British Airways or Vodafone using Clearstream.