Majestic Research

MarketWatch

U.S. Exchanges Still Eye Foreign Expansion: Analysts

By David Weidner
Published: March 30, 2006

NEW YORK (MarketWatch)—U.S. exchanges are still interested in global expansion, including a potential acquisition of the London Stock Exchange, despite the Nasdaq Stock Market’s decision to drop its bid, market analysts say.

On Thursday the Nasdaq stock market inc com withdrew its $4.2 billion bid for the LSE, something analysts believe stemmed from LSE management’s refusal to allow Nasdaq to look at its books.

“Without that, Nasdaq was unwilling to increase its bid,” wrote Richard Repetto, an analyst with Sandler O’Neill & Partners, in a research note.

But the LSE’s refusal may prove temporary, analysts speculated. For years, the exchange has been fielding offers from the likes of Deutsche Boerse, the Paris-based Euronext and Australia’s Macquarie Bank Ltd.

"It’s definitely for sale,” said Doug Atkin, chief executive of Majestic Research and former CEO of Instinet. “It is still extremely desirable. This is just people [at the LSE and Nasdaq] trying to suss out other people’s intentions.

“This thing is still very much in play.”

Atkin said he believes the LSE will be sold within nine months.

NYX, the newly public parent of the New York Stock Exchange, also is expected to weigh lodging a bid for the LSE.

The all-electronic LSE might be a better fit technologically for Nasdaq, but the bigger NYSE, which is gearing up to launch an electronic trading platform, could break the bank in pursuit of Europe’s biggest exchange.

“Nasdaq believes there is a high probability that it can consolidate the two systems onto one technology platform,” wrote Thomas Weisel Partners analyst David Grossman.

The London exchange is already trading at better than a 50% premium to its price when Macquarie made a bid for it in August. The Nasdaq bid, valued at 950 pence a share, represented a 72% premium to that and has driven the LSE’s recent share price above 1,000 pence.