The London Stock Exchange (LSE) has rejected a cash bid of 950 pence a share from US rival Nasdaq which values the UK market operator at around £2.43bn.
The bid is considerably higher than the 580 pence per share offered by Australia's Macquarie Bank earlier this year, but in a short statement LSE says the conditional proposal, which represents an eight per cent premium to its current market price, "substantially undervalues" the company.
But in a statement, Nasdaq argues that its bid represents a 64% premium to Macquarie's cash offer and a 72% premium over the closing price of 552 pence on 12 August 2005, the day before Macquarie signalled its potential interest in a possible formal approach to LSE.
Nasdaq says a tie-up between the two exchanges would result in an equity market place with over 6,266 listed companies with a total market capitalisation of £4.2 trillion. A possible merger would also provide investors with a the only global cross-border equity market platform giving issuers the ability to dual-list simultaneously in London and New York.
Although the offer has already been dsimissed by the LSE, Nasdaq insists the proposal represents "an attractive offer for shareholders and users".
LSE shares have soared since Deutsche Börse made an unsolicited offer of 530 pence a share in December 2004. At that time the stock was trading 430 pence, but the price has continued to rise on the back of continual takeover talk. The shares had closed at 880 pence this afternoon just prior to the Nasdaq statement.
Rumours surfaced in January that the US stock exchange operator was considering making a bid for LSE. The two exchanges previously held merger discussions in 2002, but talks stalled on concerns about how a combined entity would be regulated.
The LSE is still thought to be in takeover talks with Euronext, although the pan-European exchange is under pressure from shareholders to kick-start merger talks with rival Deutsche Börse.