The London Stock Exchange, seeking to extricate itself from a protracted bid saga, has rejected as "derisory" a £1.5 billion takeover proposal from Australia's Macquarie Bank.
Europe's biggest stock market said yesterday that Macquarie's proposed offer of 580 pence a share in cash "fundamentally undervalues the company and lacks any strategic or commercial credibility".
Macquarie, which has been considering a bid for the LSE since August, unveiled its proposal late on Thursday, a week before a deadline set by the takeover regulator by which it must announce a bid or walk away.
Mamoun Tazi, an analyst at Man Financial said Macquarie's move was an attempt to buy some time as it seeks a consortium partner.
"If December 15 comes and they don't put anything forward then they'd have to not say anything for six months so this is a way of extending that deadline," he said.
"If they come back with a firm offer of 580p - even if the board rejects it - then they are still in the running."
The LSE's share price reflected the likelihood that Macquarie would make a detailed, possibly higher, bid in time and by 11.02 a.m. were up 0.6 per cent at 615-1/2 pence, valuing the 300-year-old exchange at about £1.6 billion.
Sources familiar with the situation told Reuters that the LSE would be unreceptive to Macquarie's proposal which, although above an earlier approach from Deutsche Boerse at 530 pence per share, is below its recent stock price peak of 620 pence.
"You would expect that is their opening salvo and they are trying to drag the price down," Wilson HTM analyst Brett Le Mesurier said of Macquarie's bid proposal.
Macquarie executives at their Sydney headquarters were not available for comment on the LSE's rejection. According to Takeover Panel rules Macquarie needs to submit a full, detailed and unconditional offer by Thursday. Sources familiar with the situation said Macquarie aims to speak to LSE users, such as the London Investment Banking Association, in the next week.
"We have an ongoing dialogue with those interested in the market but have no plans for formal meetings," said one source.
Analysts said they still thought Macquarie faced significant obstacles.
"It has been unable to find a willing consortium partner since August, it faces a LSE management that appears unreceptive to its approach and a potential rival bidder that can extract significant synergies," said Michael Long, an analyst at Keefe Bruyette & Woods.
Mr Long said that the most likely scenario would be for the LSE to remain independent.
The LSE has long been viewed as a bid target after it failed to bulk up in earlier bouts of consolidation among trading exchanges. Bourses are under pressure to cut costs and lower fees as a single European financial services market emerges.
Deutsche Boerse dropped its takeover approach for the LSE earlier this year after opposition from its own shareholders.
Pan-European exchange Euronext is now seen as the most likely bidder after Britain's Competition Commission said in November it could approve any bid Euronext made for the LSE, provided it took steps to reinforce the LSE's independence and did not obstruct access to the LSE's clearing house activities.
The LSE has also recently held talks with Swedish rival OMX , sources familiar with the matter have told Reuters.
Euronext and Deutsche Boerse declined to comment, while OMX could not be reached.
Some analysts said a tie up with the New York Stock Exchange may be on the cards some time in the future.
"Although we don't see them as a near-term candidate to get involved, the NYSE have indicated that one of the benefits of having paper is that they can participate in consolidation. While London wouldn't give them greater product diversity it would give them greater scale and geographical spread," said Andrew Mitchell, an analyst at Fox-Pitt, Kelton.
Macquarie, Australia's biggest investment bank, is best known for buying infrastructure companies, such as airports and utilities, with stable revenue streams that are often regulated, but also has a track record of making innovative deals.
Macquarie's shares added 0.1 per cent to A$68.20 in line with the broader Australian market yesterday.