Nasdaq offers $4.2 bln for LSE, move rebuffed

NEW YORK/LONDON, Mar 11 (Reuters) The Nasdaq Stock Market on Friday offered to pay .2 billion (2.43 billion pounds) in cash to buy the London Stock Exchange, but its bid to create the first major trans-Atlantic stock exchange company was quickly rebuffed.

The London Stock Exchange Plc said it rejected the takeover approach from Nasdaq as the conditional cash proposal of 950p a share was too low, representing only an 8 per cent premium to its current share price.

This was the third bid received by the LSE in 15 months and its rejection of Nasdaq's offer fueled speculation it might not be the last, with the New York Stock Exchange -- the world's largest stock exchange and Nasdaq's arch rival -- rumoured as a potential buyer.

Nasdaq's approach comes just two days after the NYSE Group Inc., owner of the Big Board, went public by sealing its purchase of electronic rival Archipelago Holdings.

''Consolidation was going to occur sooner rather than later,'' said Richard Repetto, analyst at Sandler O'Neill. ''To me its a very clever way -- it looks like they (Nasdaq) are going at the LSE at a time when it isn't easy for the NYSE (to counterbid) because they have a major other task at hand.'' But Repetto expects the NYSE to come up with a rival offer and thinks that among U.S. players the Chicago Mercantile Exchange Holdings Inc. could be a ''longshot'' to put in an offer.

Nasdaq, the No. 2 U.S. stock exchange, said it considered its proposal attractive and would seek ''constructive discussions'' with the board of the LSE with the aim of reaching a recommended offer for shareholders. It was confident of being in a position to announce a transaction in the near term, Nasdaq said.

Spokespeople at the NYSE and the CME declined to comment when asked if they would counterbid for the LSE.

Nasdaq's move comes amid ongoing global consolidation among securities exchanges, with European exchanges circling each other in vain for well over a year as the pressure intensifies from users to cut costs and fees.

The LSE, led by Chief Executive Clara Furse, is viewed as a target partly because, unlike its main rivals, it has no derivatives platform. The LSE made no further comment after Nasdaq's statement.

REBUFFED AS TOO LOW The LSE last month successfully fought off a 580-pence-a-share bid from Australia's Macquarie Bank Ltd., and Deutsche Boerse withdrew a proposed offer in March last year after it failed to win a recommendation from LSE management. Euronext also in the past expresssed interest in making a bid.

LSE said in a statement that Nasdaq's proposal ''undervalues the company, its unique position and the very significant synergies that would be achievable'' by combining the LSE with any major exchange group.

The LSE said it intends to proceed with plans to return 510 million pounds to shareholders, subject to their approval.

But shareholder Scottish Widows, which owns 7.3 per cent of the LSE, said the Nasdaq offer was ''closer to our value'' for the exchange than previous offers.

Nasdaq shares closed up .06, or 10.28 per cent, to .56.

Repetto said that to buy the LSE, Nasdaq would likely have to restructure its debt. The company last year spent 4.5 million buying the Inet trading platform.

Another issue would be getting the deal through regulators. It would have to be cleared by the U.S. Securities and Exchange Commission as well as the UK's Financial Services Authority.

Lehman Brothers and Merrill Lynch are advising the LSE.

Greenhill&Co. and JP Morgan are advising Nasdaq.

REUTERS SD PM1444