NASDAQ has finally launched its long-awaited bid for the London Stock Exchange (LSE). It announced today that it was offering 2.7 billion ($5.1 billion) for the company. NASDAQ, which has already acquired a 25 per cent stake in the LSE following the refusal of an earlier bid, is offering to pay 1,243 pence a share in cash for the rest of the company.
The price is 40 per cent above Nasdaq’s previous offer in March, but adjacent to the average price which NASDAQ has paid for its 25 per cent stake.
Nasdaq says the acquisition will create the biggest stock exchange in the world by number of listings: 6,400 companies with a total market capitalization of 6.3 trillion ($11.8 trillion), as well as the most active exchange, with an average daily volume of 7.4 billion shares traded, 5.5 million average daily bargains and an average daily value traded of approximately 41.5 billion ($75.6 billion).
“We are excited about the prospect of combining two strong businesses to form the leading global, cross-border equity market platform giving issuers the ability to dual-list simultaneously in London and New York, ” says NASDAQ President and CEO Robert Greifeld. “The combined entity will be well positioned to lead further consolidation and compete effectively for the benefit of all market users.”
The 2.7 billion bid represents an enterprise value of approximately 2.9 billion (based on LSE’s net debt of 284.7 million as at 30 September 2006). The B Share Offer is in cash at 200 pence per LSE B Share (plus an amount equal to the accrued dividend), valuing the entire issued B share capital of LSE at approximately 16.5 million. In total, the offer represents a 54 per cent premium to the price of LSE shares on 10 March 2006, when NASDAQ first approached the LSE.
NASDAQ has requested a meeting with the LSE chairman to seek a recommendation of its offer. NASDAQ adds that it “appreciates LSE’s strong stand-alone growth prospects. In particular, NASDAQ recognizes the strong growth in SETS volumes of 56 per cent. year-on-year for the six months to September 2006, the strong new issue activity currently being experienced and the growth in related activities. This potential needs to be set against the fact that LSE’s share price has risen 216 per cent. over the past two years and 103 per cent. over the past year vs. net income growth of 75 per cent. and 50 per cent. respectively. NASDAQ believes this potential, as well as the significant synergy benefits of a combination, are fully reflected in its offer price ” NASDAQ will today submit a filing to the OFT in relation to the offer, The American stock exchange says it “does not expect the transaction to give rise to any significant anti-trust issues.” The offer is not subject to any other formal regulatory approvals and nor does it require NASDAQ shareholder approval NASDAQ would like to complete the deal in the first quarter of next year.
NASDAQ says it has an “established track record” of reducing operational costs. It claims to have reduced average execution fees by 55 per cent. since 2002, and is undertaking as part of the offer not to increase standard broker-dealer tariffs for at least three years.
In NASDAQ ownership, LSE will continue to be run as a Recognised Investment Exchange (RIE) regulated solely by the UK Financial Services Authority (FSA). The American exchange has held “detailed discussions” with the FSA to establish this. Greenhill is acting as lead financial adviser to NASDAQ and NAL, with Dresdner Kleinwort acting as broker.