London exchange faces hostile bid

A handshake may not have sealed the deal...

The Swedish owners of the Stockholm stock market are reported to be preparing a hostile bid for London Stock Exchange (LSE).

OM Group is said to be preparing a direct approach to LSE shareholders, after London's chairman Don Cruickshank on Friday rejected a surprise bid.

We were disappointed that they did not take it but the offer is still standing. Euronext is an alliance that is open

Euronext on offer to London Stock Exchange

The Swedish approach came out of the blue and casts further doubt on London and Frankfurt stock markets' merger plans.

Both UK and German opposition to the proposed merger has been vocal in the run up to shareholder votes on the creation of the iX pan European share trading exchange.

The Swedish bid may also prompt other exchanges, including America's Nasdaq stock market, home to many of the world's large technology firms, and New York Stock Exchange, to launch counter offers.

Euronext offer

Another player watching events is Euronext, the exchange created by the mergers of Amsterdam, Brussels and Paris stock markets.

"Last spring we offered the chance for LSE to join Euronext. We were disappointed that they did not take it but the offer is still standing. Euronext is an alliance that is open," a spokesman said this weekend.

According to the business pages of all of the UK's Sunday papers, OM Gruppen will launch an £800m ($1.18bn, 1.3 billion euros) hostile bid on Tuesday.

The bid is likely to be for £7 in cash and £20 in new OM shares per LSE share held.

That is similar to the offer made on Thursday evening which Mr Cruickshank subsequently described as "derisory".

Vote delays call

Its main shortcoming, he said, was that it failed to provide "the benefits which will arise from achieving critical mass in European securities".

The Frankfurt exchange also said it was willing to support the LSE in countering the hostile Swedish takeover bid.

The Swedish bid has led to calls for a delay of the LSE shareholder vote due on 14 September. It needs 75% approval for iX to be created.

The Association of Private Client Investment Managers and Stockbrokers (APCIMS), representing brokers, was among those saying the vote should be delayed.

Technology makes location less important

It also said the LSE should make public details of an offer it had received from a consortium led by the Paris stock market.

The proposed merger of London and Frankfurt exchanges also involves an alliance with Nasdaq Europe.

It was announced after a long running series of talks - and rows - during attempts to integrate Europe's traditional stock exchanges, ready to take on newer, more technologically advanced, rivals.

London Stock Exchange's management has come under fire in recent years for its slow reactions to global trends and technology.

Management criticised

As part of its attempts to modernise, it changed its ownership structure earlier this year, demutualising after 200 years.

This move, to become a public company rather than being owned by its members, allows its shares to be traded - which in turn makes it vulnerable to hostile bids.

According to the City's rules on takeovers, if there is a creditable rival offer put forward to the German plan, it is likely that the vote would have to be delayed.

The Swedish move came as German business paper Boersen-Zeitung, found outspoken support for the merger among only 28.4% of the Frankfurt exchange's shareholders.

However, insiders at Frankfurt said they expected to get more than 80% support in their merger vote, also on 14 September.