Sweden's OM Group has launched a £808 million hostile bid for the London Stock Exchange. The LSE has rejected the move, but is likely to postpone a September 14 shareholder vote on its proposed merger with Frankfurt's Deutsche Borse to create the iX exchange.
OM's predatory swoop on the LSE follows the rejection of a friendly approach to the London exchange late last week.
OM believes that London, as the major centre for equity liquid in Europe, and operating under a single regulatory environment, will be the ideal locus for a singe European stock market. OM's management team criticises the proposed iX merger as being "founded on an outdated concept of merging two nationally based operations with limited regard to the technological and commercial changes in global equity markets".
The Swedish technology group, which already owns the Stockholm Bourse, believes that strengthening the technological and commercial base of LSE's markets and trading platforms will give it a competitive advantage, ahead of traditional national exchanges, to exploit global equity market opportunities.
OM issued a statement to back up its bid, stating: "The success of stock exchanges in the future will be determined by their operational efficiency, brand strength, technological superiority and their ability to provide systems dependability at the lowest trading costs for customers. The European exchange that performs best on these criteria will win increasing trading volume, generating the deepest pool of liquidity for investors. Other exchanges will lose trading volume to the best performer."
OM founded and operated the first for-profit, privately owned electronic derivatives exchange in 1985. The company currently provides integrated exchange technology to 20 international exchanges and clearing houses
Under the terms of the bid, OM will offer LSE Shareholders 0.65 new OM Shares and £7.00 in cash for each share held, valuing each LSE Share at £27.19, a 15.7 per cent. premium to the closing price on 25 August 2000, and LSE at approximately £808 million.
OM believes that under its direction the LSE could achieve yearly pre-tax cost savings rising to more than £30 million within four years. The group believes there will be significant potential for enhancement of income from trading service-related activities.
The LSE dismissed OM's offer as "wholly inadequate value for shareholders", and decribed the business proposition as "inferior" to the porposed merger with Deutsche Bourse to create iX.
Deutsche Borse has reacted cautiously to OM's bid, but is expected to launch a retaliatory strike in the near future.