If at First You Don’t Succeed…
November 21st, 2006 by Justin
Bid $5 billion. That’s what the Nasdaq chose to do in its latest effort to purchase the London Stock Exchange. The LSE has twice rejected Nasdaq’s offer, first for the equivalent of 950p (in March 2006), and this time for over 25% more, or 12.43 sterling. It seems the American exchange that normally plays second fiddle to the New York Stock Exchange is recognizing what many others have pointed out in recent months–that London’s competitiveness in the financial markets is calling New York’s traditional dominance in finance into question.
Other notables in Manhattan agree, including Michael Bloomberg who’s commissioning a study into how New York can regain its place at the top financially. According to the NY Times article, one potential roadblock to the offer is that despite being substantially higher than Nasdaq’s previous one, it is only 2% above where LSE closed for trading at the end of last week. However:
“It is difficult to see how this is not going to go through,” said Lynton Jones, a founder of Bourse Consult in London, which advises stock exchanges, and a former head of Nasdaq’s international operations. “The London exchange is boxed into a corner.”
But Nasdaq may still need to sweeten its offer. Apparently anticipating a higher bid, investors bid up the shares of the London Stock Exchange 6 percent on Monday, to £12.91.
But officials at ratings agencies said that paying more could be dangerous for Nasdaq. One agency, Moody’s Investor Services, put Nasdaq on review for a possible downgrading because of any additional debt that the company might take on.
On the positive side, Nasdaq does seem to have acquired enough of the LSE’s shares (over 28%) to prevent others from getting involved in the contest. The only certain beneficiary at this point seems to be those making short-term bets on the LSE’s stock price.
[…] I’ve made mention of the fierce NY-London financial rivalry in a previous post. For the uninitiated, the basic argument is that restrictive laws and policies (like Sarbanes-Oxley) have caused New York to lose its edge in financial markets. Large companies looking to go public have instead turned to London and in many cases Hong Kong rather than going the traditional route of listing on the all-powerful New York Stock Exchange. […]