LONDON – The Nasdaq Stock Market (NDAQ) has staked a claim on the London Stock Exchange by becoming its biggest shareholder, forcing the pace of consolidation in the sector, analysts said on Wednesday.
Nasdaq's purchase of a near 15 percent stake in the much sought-after exchange -- just two weeks after dropping a tentative 2.4-billion-pound ($4.18-billion) offer -- puts the U.S. exchange in prime position to gain full control of the LSE and complicates any potential deal with another exchange, they said.
Sources familiar with the situation said Nasdaq has not ruled out buying more LSE shares in the market. Under UK takeover rules it will have to limit its stake to under 30 percent for the next six months, barring developments such as a rival launching a bid, or the LSE agreeing to a takeover.
The move pushes the LSE's past suitors Euronext and Deutsche Boerse, who are under pressure from key shareholders to merge, back to the negotiating table, analysts said.
"We believe Nasdaq's decision to acquire the 15 pct stake in LSE is positive for the exchange sector in Europe. We expect Euronext and Deutsche Boerse's share prices to rise as the probability for a deal between the two has increased," said Mamoun Tazi, an analyst at Man Securities.
"They (Nasdaq) could keep buying shares and then make a takeover, or they could just sit and wait. It could be a stalling tactic, stopping Euronext from pursuing an all-share merger," said one industry source who declined to be named. "Either way it's a very shrewd move."
Both Euronext and Deutsche Boerse declined to comment on Nasdaq's move. The LSE was not immediately available to comment.
Exchanges around the world are under pressure to consolidate to boost volumes, create economies of scale that reduce trading costs and to attract more companies to list on the market.
"This move could discourage Euronext from making a bid for LSE (and) give Nasdaq a head start if it were to enter a bidding war with Euronext. It may help get LSE management to the negotiating table," said Michael Long, an analyst with Keefe, Bruyette & Woods.
"Nasdaq could walk away with a good profit if Euronext did acquire LSE."
Shares in the LSE have surged around 150 percent over the past 12 months while it has been courted by Deutsche Boerse, Euronext, Australian bank Macquarie and Nasdaq, although it has so far rejected offers as being too low.
By 0941 GMT shares in the LSE -- which can trace its origins back 300 years -- were up 14.4 percent at 1,188-1/2 pence, above the 1,175 pence a share Nasdaq paid for its stake, reflecting the possibility that Euronext or Nasdaq's arch-rival New York Stock Exchange (NYX) may come back with a higher offer, dealers said.
In Frankfurt shares in Deutsche Boerse were up 3.1 percent at 114.24 euros, while in Paris shares in Euronext were up 3.2 percent at 68.30 euros.
"Nasdaq's stake makes it more difficult and or expensive for NYSE to acquire LSE," said Long.
Industry watchers have said the LSE's valuation reflects its strategic position as a place for companies to list their shares, given the Sarbanes-Oxley act in the United States has ushered in new compliance rules that are considered by some to be too onerous and expensive.
After the close of trading on Tuesday Nasdaq said it had bought a 14.99 percent stake in the LSE, having on March 30 announced it had dropped its proposed cash bid of 2.4 billion pounds, or 9.50 pounds a share.
Under the share acquisition on Tuesday, Nasdaq bought over 35.4 million LSE shares from Threadneedle Asset Management Ltd -- until then the LSE's largest institutional shareholder -- as well as a further 2.7 million shares elsewhere to give it a 14.99 percent stake.
Under UK takeover rules Nasdaq must limit any further purchases to under 10 percent over a seven-day period.