Liffe chiefs back Euronext bid

Liffe, the City-based futures and options market, is set to come under continental European ownership, after bosses spurned a takeover bid from the London Stock Exchange.

Liffe chiefs have unanimously chosen Euronext, the joint Amsterdam, Brussels and Paris stock exchange, as preferred bidder after receiving an offer of £555m, or £18.25 per share.

Success in the takeover, which still requires shareholder approval, would represent a major coup for Euronext, which said it would develop Liffe as its hub for derivatives trading.

But the deal would be a setback for rival bidders Deutsche Boerse and, in particular, the London Stock Exchange (LSE).

Rejection

The LSE's proposed offer valued Liffe at about £19.00 a share, of which £12.00 was cash and the balance was LSE shares.

The London Stock Exchange, which has itself been a takeover target, had hoped to become Europe's dominant exchange through a merger with Liffe.

"We put forward a bold proposition for the creation of a combined business...we are surprised that Liffe did not share our ambitious vision," said Clara Furse, LSE chief executive.

The failure will be particularly hard to swallow for Ms Furse whose strong relationship with her former colleagues at Liffe made the LSE appear to be the favoured suitor.

But the LSE's chairman was upbeat about the exchange's ability to pick itself back up again.

"The LSE is engaged in other opportunities to broaden the scope and scale of its businesses," said Don Cruickshank, hinting that other alliances or takeovers could be in the pipeline.

'Compelling' offer

Liffe said the business case for the Euronext bid was "clear, compelling and ambitious".

Euronext shared Liffe's views about the potential of the global derivatives market, a statement said.

Hugh Freedberg, Liffe chief executive, said: "This is the right result for Liffe and for London and we believe it will be welcomed by shareholders and customers alike."

For Euronext, chief executive Jean-Francois Theodore, said:

"We are very proud and honoured to have the confidence of Liffe's board.

"This historical step will strengthen and develop the derivatives business in Europe."

Technology drive

Takeover would be the latest in a series of shake-ups at Liffe, which has embraced technology in place of its "open outcry" trading floor, which was noted for the colourful jackets worn by traders.

The exchange's software, Connect, would be used under Euronext ownership.

Connect is now accessible in 400 locations, and handles about £500bn a day in trades, with volumes 75% higher last month than September 2000.

Exchanges consolidate

The takeover battle has come amid a long-standing period of consolidation among exchanges.

Both Deutsche Boerse and Swedish technology firm OM Group attempted to tie up with the London Stock Exchange last year.

Euronext, itself formed from a tie-up last year, last November offered to strike an alliance with the LSE.

US-based Nasdaq in March boosted its European presence, and plans to form a 24-hour-a-day global exchange, by snapping up Belgium's Easdaq.