London exchanges eye merger

LSE: Under pressure to merge

The London Stock Exchange has confirmed that it has made an approach to Liffe, London's futures and options exchange, about a possible takeover offer.

Liffe had earlier said it had received approaches from a number of possible buyers.

The LSE's announcement follows months of speculation about a merger of the two London exchanges.

The LSE, in particular, has been under pressure to find a partner after the collapse of its planned merger with Frankfurt's Deutsche Boerse and the successful repelling of a hostile bid by Sweden's OM Group.

Growing competition

The failure to merge with Deutsche Boerse led to the departure of chief executive Gavin Casey, who was replaced by Clara Furse, a former deputy chairman of Liffe, in January.

She has pledged to make the LSE compete more effectively for business among other world exchanges.

Growing competition in recent years has included the merger of the bourses of Amsterdam, Brussels and Paris to form Euronext and an increased presence in Europe of Nasdaq, the New York-based market specialising in technology listings.

Both Euronext and Nasdaq as well as OM could also be possible bidders for Liffe, sources said.

Interdealer broker ICAP - owner of 5% of Liffe - said it did not currently intend bidding to take over Liffe.

Liffe has not identified any of its potential bidders.

'Bulking up exercise'

"What is likely is that the LSE will come up with a blockbuster bid which Liffe will agree to," said ICAP chief executive Michael Spencer.

He added: "But [I] personally remain of the view that an LSE/Liffe merger would be purely a bulking up exercise for the LSE with little synergy and no strategic value."

Shares in Liffe - closely held and traded on an unlisted market - leapt almost 40% after the announcement to as much as £12, valuing the exchange at £320m.

LSE shares, floated this summer, rose 7% to 328p, valuing the exchange at £974m.