OM Group of Sweden yesterday mounted the first ever hostile takeover bid for a bourse with an £822 million sterling offer for the London Stock Exchange (LSE).
The move was immediately rejected by the LSE but some observers believe it will spark a bidding war for the London exchange.
The OM move is a severe disruption to the LSE's plans to merge with Frankfurt's Deutsche Borse to create the iX exchange. Shareholders had been due to vote on those proposals on September 14th but the LSE yesterday conceded that the vote would have to be postponed.
Mr Olof Stenhammar, chairman and founder of the Swedish technology company and stock exchange operator, said: "We believe that the proposed iX merger squanders the potential of the LSE and that, with our proven management skills and leading technology, we can secure the LSE's position as the pre-eminent European stock exchange."
OM has offered LSE shareholders £27.40 per share. This compares with the £23.50 at which the LSE shares changed hands on Friday.
OM is offering 0.65 new OM shares and £7 in cash for each share held. There is a loan note alternative. However, LSE shares, traded on a matched-bargain basis, yesterday rose marginally above the offer price to £27.50.
Yesterday's formal bid had been expected after LSE board rejected a friendly approach on similar terms last Friday.
"OM's offer represents wholly inadequate value for shareholders and constitutes an inferior business proposition to the proposed merger with Deutsche Borse to create iX," the LSE said.
Deutsche Borse has already indicated its willingness to retaliate to an OM bid. However, people close to the Frankfurt exchange yesterday called for caution.
Mr Norbert Juchem, a board member of Bayerische HypoVereinsbank, Germany's second-largest bank and member of Deutsche Borse's supervisory board, rejected suggestions that Deutsche Borse come up with any quick solutions such as making a counter offer for LSE, taking on the role of a "white knight".
"It is too early to take decisions of that importance. We now have to look for a solution whereby we can maintain our final goal of creating a joint front-end, a pan-European trading platform, and ultimately make trading cheaper," he said. "If we want any such deal to succeed we need the support of the market members," he added.
The OM bid is also expected to force the LSE and Deutsche Borse to address the many uncertainties regarding their merger plans. Some shareholders expect it to result in a renegotiation of the bid.
"We're not taking the bid seriously, but we are pleased this has come about because it may force iX to provide more information regarding regulation and costs," said an LSE shareholder at a large investment bank.
A broker at a large European investment bank with a stake in the LSE said that the Swedish bid could flush out another bidder such as Nasdaq, the US market for high-growth stock or Euronext, the exchange to be formed by the Paris, Brussels and Amsterdam bourses.
