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Last Updated: Monday, 13 March 2006, 15:12 GMT
Q&A: What's next for the LSE?
London Stock Exchange
A number of big names have targeted the LSE recently
There's another question mark over the future ownership of the London Stock Exchange (LSE) following speculation of a bid war from across the Atlantic involving the New York Stock Exchange (NYSE) and rival stock exchange the Nasdaq.

BBC News looks at what this latest development could mean.

What's been going on?

The bid ball starting rolling again late last week when the LSE announced to the world that the New York's Nasdaq exchange had launched an unsolicited bid offer, which the London exchange had duly rejected on the grounds that it "substantially" undervalued the firm.

On Sunday press reports said the NYSE was considering whether to jump in and also launch a bid.

In the meantime, the Nasdaq has taken on board the LSE's rebuffal of its 2.43bn ($4.2bn) offer, but has not ruled out raising its bid or bearing its teeth and launching a hostile takeover.

All this has brought a smile to the face of LSE shareholders, who have watched its share price rise by nearly a quarter on Monday.

Why the Nasdaq?

London is becoming a more attractive place for US companies to do business as an international hub.

The LSE has been described as a "tasty morsel," with a "fantastic reputation".

It's also very profitable.

It will be increasingly difficult for the LSE to reject further approaches on the grounds of undervaluation
Richard Hunter, Hargreaves Lansdown

Economists will tell you that people go to Tokyo to do business in Japan, New York to do business in the US, but they come to London to do business with the rest of the world.

Also, London has a more flexible approach to both foreign companies and investors than the US does.

Indeed, London has started to overtake New York as the major global financial centre as leading engines of economic growth switch away from the US.

Could this go the way of previous offers?

It depends on how much the LSE's board of directors is determined to keep its independence. They've done pretty well so far.

The last company to try to win the LSE's hand was not even a rival stock exchange - it was an investment bank best known for buying into airports and utilities.

Australia's Macquarie Bank backed out of a proposed 1.5bn bid last month after failing to garner enough support from shareholders.

It may well have succeeded had the LSE not kept investors sweet by doubling the amount of cash it was planning to return to shareholders, a vow it reiterated after Friday's attempt at courtship from the Nasdaq.

Before Macquarie, Paris-based exchange Euronext expressed an interest, but has still to table a bid. The Nasdaq's offer may spur it into action.

Prior to that, Germany's Deutsche Boerse made a 1.25bn approach, but later skulked away in the face of protests from its own shareholders.

What's in it for the LSE?

Apart from swelling the pockets of shareholders, it's hard to tell immediately.

Ownership by the Nasdaq, for example, may do little to make the LSE more efficient.

The Nasdaq's technology is significantly slower that London's and the US exchange has never been far from scandal during its 30-year existence.

The hassle of US regulation and its legal systems would also make London a less attractive place to list.

This, of course, would also apply if the NYSE launches an offer and the mighty Wall Street exchange looks unlikely to stand by and let Nasdaq take the prize.

What will happen now?

As in any bid situation, the usual wait-and-see rules apply.

Investors must wait to see if the Nasdaq comes back with a higher bid and whether the NYSE joins in with its own offer.

And last, but not least, they must also see whether Euronext will finally put its cards on the table and make it a threesome.

The continental exchange has said it will make a statement about the LSE when it publishes its results on Tuesday this week.

Whatever happens, the latest move in the LSE bid saga has "all the hallmarks of being the beginning of the end of its independence", according to Richard Hunter, head of equities at Hargreaves Lansdown Stockbrokers.

"It will be increasingly difficult for the LSE to reject further approaches on the grounds of undervaluation," Mr Hunter said.




SEE ALSO:
LSE shares surge on bid war hopes
13 Mar 06 |  Business
Nasdaq hails 'attractive' LSE bid
10 Mar 06 |  Business
Macquarie signals end to LSE bid
20 Feb 06 |  Business
LSE seeks end to bid speculation
03 Nov 05 |  Business
D Boerse ditches LSE bid plans
07 Mar 05 |  Business


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