LONDON: The London Stock Exchange has become a credible takeover target as it faces a battle to merge with its Toronto counterpart and after NYSE Euronext beat off a hostile approach, analysts said.
LSE Group, led by chief executive Xavier Rolet, insists it is committed to a merger with its Toronto counterpart, TMX Group, after a Canadian consortium launched an informal takeover bid that could derail the deal.
As LSE weighed up its next move, Nasdaq OMX and IntercontinentalExchange (ICE) abandoned their hostile takeover bid for NYSE Euronext, opening the way for the New York exchange's merger with German powerhouse Deutsche Boerse.
All this searching for the right merger, and the ensuing economies of scale, sets up a possible takeover approach for LSE, according to some analysts.
The "announcement of Nasdaq/ICE withdrawing its offer... and the interloping deal on TMX makes LSE a credible target", UBS bank analyst Arnaud Giblat said on Tuesday.
LSE in February launched a merger with TMX, but over the weekend the Canadian outfit revealed that it has received an informal approach from Maple Group Acquisition Corporation, worth 20 percent more.
The grouping of Canadian financial institutions and pension funds values TMX at about 3.58 billion Canadian dollars (US$3.69 billion), according to various media reports.
"Given the premium being offered we see the stand-alone LSE offer has less than a 50:50 chance of success," Numis Securities analyst James Hamilton wrote in a note to clients.
"The failure of the deal increases the risk of an offer being made for the LSE."
Hamilton added that if the deal fails "the LSE's market position will be relatively small in the new larger exchange world. For all platform businesses the minimum efficient scale is very large.
"Consequently, we believe the long-term strength of the LSE's market position is dependent on it finding increased scale."
Should LSE succeed in merging with TMX, one of the world's biggest trading platforms would emerge, dominated by deals for commodities.
Rolet's predecessor Clara Furse oversaw the LSE's merger with Borsa Italiana in 2007 and was successful in brushing off a number of hostile takeover approaches.
The Nasdaq failed to seize the LSE during a series of bids between 2005-07, as global stock markets sought consolidation.
On Monday, Nasdaq and ICE dropped their aggressive $11.3 billion bid for NYSE Euronext -- opening the way for the New York exchange's merger with German powerhouse Deutsche Boerse -- after US antitrust officials threatened to sue to block their bid.
Deutsche Boerse has itself failed three times to buy the LSE -- in 1998, 2000 and 2005 -- as it sought to keep ahead of arch-rival Euronext, which operates the Paris, Amsterdam, Brussels and Lisbon exchanges.
In recent years, LSE has also attracted major investment from Dubai and Qatar.
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