LSE 'in merger talks' with Nasdaq

The battle to win the hand of the London Stock Exchange may be about to reopen after a report emerged that the market was in merger talks with Nasdaq.

London Stock Exchange has opened negotiations with US-based Nasdaq after failing in previous attempts to find a merger partner and join the global exchange consolidation wave, a source told Reuters news agency.

"The talks have moved on," the source said.

"Being isolated in Europe, the LSE recognises this is a perfect fit."

For Nasdaq, the merger would allow the tech-heavy exchange to gain a long-sought foothold in Europe.

Nasdaq's takeover of nascent pan-European exchange Easdaq a year ago has failed to reap hoped-for rewards, observers said.

LSE chief executive Clara Furse told a conference on Wednesday that that the exchange was not up for sale.

'Free for all'

Any attempt by Nasdaq to tie-up with the LSE would be likely to be keenly contested by Europe's other two heavyweight exchanges - Frankfurt-based Deutsche Boerse and Euronext, the joint Amsterdam, Lisbon, Paris and Brussels exchange.

"As soon as [Nasdaq] announce a merger it will be a free for all to come in and counterbid for the LSE," a banking source said.

Both Deutsche Boerse and Euronext see the LSE as key to gaining European dominance.

And, with Nasdaq boasting only limited cash reserves, rival bidders may be better placed to

LSE shareholders in 2000 undermined plans to merge the market with Deutsche Boerse.

An £808m bid by the operator of the Stockholm Stock Market also failed.

The LSE is reported to have spurned repeated overtures from Euronext.

Strategic challenge

While the London exchange was once Europe's undisputed leader, it has been increasingly challenged by Deutsche Boerse and Euronext.

Last year Euronext won the battle to take over London's futures market Liffe, undermining the LSE's campaign to diversify beyond its traditional share trading operations.

"As a business London is not doing badly, but strategically it is doing badly after the failure to buy Liffe," said Ruben Lee, a stock exchange expert at Oxford Finance Group.

Shares in London Stock Exchange rose to an all-time high of 479.25p, valuing the business at more than £1.3bn, before falling back to close at 470p.