Competition probe into LSE bids

The LSE has been a target for two rival European bourses

Shares in the London Stock Exchange (LSE) have dropped on news of a probe into recent takeover approaches for the trading platform.

The Office of Fair Trading (OFT) is referring the rival bid approaches of Deutsche Boerse and Euronext to the UK's Competition Commission.

The OFT has recently been examining whether Europe's largest stock exchanges are effectively monopolies.

The referral could delay any potential takeover of the LSE for several months.

Shares in the London Stock Exchange dropped 5% to 452 pence following the announcement, before recovering in later trade.

Competition 'episodic'

The OFT's chairman Sir John Vickers said the proposed bids came at a time of emerging competition in equities trading between the LSE, Deutsche Boerse and Euronext.

It needs to be investigated whether either merger would lessen future competition in equities trading in the UK Sir John Vickers, OFT chairman Check the LSE's share price

It is recommending that the Competition Commission looks into whether the potential takeovers would dramatically reduce competition in the financial services market.

"Although such competition has so far been episodic, it needs to be investigated whether either merger would lessen future competition in equities trading in the UK," said Sir John.

The Competition Commission may also choose to focus on competition in clearing services for equities trades, the OFT said, particularly in relation to the Deutsche Boerse bid.

In December, Deutsche Boerse approached the LSE with a 530p per share takeover bid and was twice rejected by the LSE.

After its Paris-based rival Euronext said it would launch its own bid, Deutsche Boerse came under increasing pressure from its own shareholders to ditch its £1.3bn advance, which they felt was too high a price.

The Competition Commission is expected to publish its conclusions by 12 September, 2005.