The London Stock Exchange said it will more than double the cash it plans to return to shareholders to £510 million as it defends itself from a bid by Australia's Macquarie Bank.
The London exchange, the subject of a long-running takeover saga, asked shareholders once again to reject the £1.5 billion offer from Macquarie Bank, saying it failed to take into account the bourse's franchise and strong trading performance.
"The London Stock Exchange has a unique strategic position and an exceptional customer franchise," Chairman Chris Gibson-Smith said on Friday.
"Macquarie's offer recognises none of this. It provides no value today and reflects no value tomorrow." Macquarie now has until February 26 to raise its 580-pence-a-share offer. Sources familiar with the matter told Reuters it had not ruled out an increased offer, adding it would boost its bid by around one pound a share - still below the LSE's current share price of around 790 pence a share.
The exchange said it would also buy back up to £50 million of its shares each year after returning the cash to shareholders.
It will also raise the total full-year dividend by 71 per cent to 12 pence, the LSE said in a statement.
The increases are part of the London exchange's programme of making its balance sheet more efficient, Jonathan Howell, the LSE's finance director, told journalists on a conference call.
"We are now at the leading edge of good capital management in the sector," he said.
The LSE said it was forecasting strong growth in its electronic order book, SETS, with the average number of trades per day expected to grow by at least 100 per cent by the 2008 financial year.
The strong performance will continue to be driven by the popularity of contracts for difference (CFDs) and the increasing shift to algorithmic trading, a sophisticated electronic method of trading shares by breaking large orders into smaller chunks according to pre-set parameters.
"This all fuels growth on SETS... it's a secular story," Clara Furse, LSE chief executive, told the conference call.
The LSE said the current share price did not fully reflect its stand-alone value, adding that its price-to-earnings multiple stood at a discount to rivals such as Euronext and Deutsche Boerse, both of whom have approached the LSE with merger plans.
"It's clear we are trading cheap relative to the other exchanges," Ms Furse said. "It doesn't tie in with our actual performance." Neither Macquarie nor Euronext were immediately available to comment on the LSE's defence document.