LSE bid reaches end of the road

OM's bid has finally hit the buffers but the group walks away with a much higher profile

Sweden's OM Group has failed in its attempt to take over the London Stock Exchange (LSE).

The Swedish technology group won the backing of just 6.7% of the LSE's shareholders.

For its bid to succeed, it had needed to secure the support of 50% plus one share.

"Now we can get on with building the business from its strong foundations

Don Cruickshank, LSE

OM chief executive Per Larsson.

London Stock Market chairman Don Cruickshank said:

"I am pleased that the distraction of OM's offer is over.

"Now we can get on with building the business from its strong foundations and implementing our strategy in full consultation with shareholders and customers."

OM's strategy to provide its leading technology to customers around the world and to expand the securities markets that it owns and operates remains firmly on track.

OM chief executive Per Larsson

But OM chief executive Per Larsson said his company would continue to expand worldwide.

"OM's strategy to provide its leading technology to customers around the world and to expand the securities markets that it owns and operates remains firmly on track.

"We fully respect the fact the LSE shareholders need more time to decide the future of their stock market," he added.

Bid battle

Last month after increasing its offer, OM said it had won the backing of 2.73% of the LSE's shareholders, well below the level needed for its bid to succeed.

The Swedish company, owner of the Stockholm stock exchange and a leader in sharetrading software, had not been thought likely to win the battle.

However, its surprise bid has had the effect of ending plans for the LSE to merge with its German rival, the Deutsche Borse.

The LSE's chairman, Don Cruickshank, has called on OM to abandon its bid

OM Group's original target had been to garner 90% of acceptances, but on Thursday its chief executive Per Larsson had conceded the firm would be happy to accept just 50% plus one share.

The Swedish technology company had offered to pay about £940m ($1.33bn) for the LSE. This is a premium of more than 30% on the exchange's value on the stockmarket. LSE shareholders would have to choose between receiving 1.4 new OM shares per LSE share or £20 in cash plus 0.5 new OM shares.

Win-win for OM Group?

Mr Larsson had acknowledged that "the market does not believe we will get it", but argued that the bid had been "well worthwhile."

The company had extended the acceptance period for its offer once before but has now run out of time.

But OM believes it has won, despite the decision of LSE shareholders. The takeover bid has made the OM brand famous, and, although that bid has failed, OM can use the new-found fame to push its new pan-European electronic exchange Jiway, which will start trading in a week's time.

Wall Street mulls London move

The failure of OM's bid raises the prospect of other bidders moving in on London.

Deutsche Börse in Frankfurt is pondering whether it can make a fresh attempt to link up with London, and congratulated the shareholders on their decision.

Many London marketmakers are probably hoping for a bid from the United States, but Richard Grasso, chairman of the New York Stock Exchange, says he would not make a hostile bid for the LSE.

However, he said he would listen to any offer from London for a friendly alliance.

The technology-dominated Nasdaq stock market is also waiting in the wings and known to be keen on expanding its presence in Europe.

Another potential bidder is the Euronext alliance of the bourses in Paris, Amsterdam and Brussels. Tellingly, Euronext's president Jean-Francois Theodore refused to say on Thursday whether the alliance planned to move in on its large London rival.

The alternative for the LSE would be to go it alone, and that is the new strategy of the exchange's management. However, not only OM's Per Larsson, but many banking analysts doubt whether this is a viable plan.