(November 1) – “Does the Nasdaq Stock Market have designs on the London Stock Exchange?” asks Grep Ip in today’s Wall Street Journal.
“Since the planned merger between the LSE and Deutsche Boerse collapsed, Nasdaq, which would have been a partner of the merged exchange, has been examining how it can establish itself in Europe in a big way. Though it remains tight-lipped about specifics, Nasdaq clearly considers itself a natural partner should London decide to seek some sort of alliance.”
” ‘Something will happen in Europe with Nasdaq in the next six months,’ a high-level Nasdaq official said Tuesday. ‘We’ve had investment bankers in Europe working on that question for the last three months. The numbers have been calculated and recalculated and we have a reasonable set of options we might pursue depending on how things unfold.’ “
“One option open to Nasdaq is making an outright acquisition bid for the LSE, which is currently fending off a hostile bid by Sweden’s OM Gruppen AB. But regardless of Nasdaq’s desires, such a move could face significant obstacles, not least of which is the LSE’s intention to remain independent. Just last week, LSE Chairman Don Cruickshank highlighted in a speech the disadvantages of a merger with Nasdaq.”
“As a result, Nasdaq likely would hesitate to make a hostile bid, but might consider that its chances of inking a friendly deal are higher than those of any other market, given its access to financial resources and its lack of commitment to any particular technology platform. Moreover, a deal with a U.S. exchange might be more palatable to the British than a takeover by another European exchange.”
“Nasdaq officials said Tuesday they have been talking with the LSE, Deutsche Boerse, Euronext and OM Gruppen about potential partnerships and combinations in recent months. Euronext was formed by the recent merger of the Paris, Brussels and Amsterdam exchanges. OM Gruppen, operator of the Stockholm stock exchange, said Monday that it had acceptances for its bid from shareholders representing only 2.73% of share capital in the LSE, a sign that it is unlikely to succeed. The bid expires Nov. 10.”
“Deals between exchanges are notoriously hard to consummate. Still, Nasdaq has long been interested in Europe and has approached exchanges about possible combinations in the past. In more recent visits to Europe, including last month, the market’s pitches have been general and have lacked specific short-term and medium-term plans, according to someone familiar with their presentation.”
“But Nasdaq is developing the financial wherewithal for a bid. It is converting to a shareholder-owned governance structure from a member-owned structure. In June the National Association of Securities Dealers sold 40% of Nasdaq on a fully diluted basis in the first phase of a private placement that raised $260 million for Nasdaq and $74 million for the NASD. The second phase is to be completed before year end and is to reduce NASD’s ownership to less than one-third.”