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London rejects higher bid
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October 13, 2000: 8:45 a.m. ET
U.K. stock exchange says no to OM Gruppen's increased $1.6B buyout offer
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LONDON (CNNfn) - The board of the London Stock Exchange on Friday swiftly rejected an increased £1.06 billion ($1.6 billion) hostile takeover bid by Sweden's OM Gruppen AB, the owner of the Stockholm bourse.
OM Gruppen earlier in the day increase its offer to LSE shareholders, proposing to pay either 1.4 of its shares for each LSE share, valuing the target stock at £35.83, or 0.5 OM share plus £20 cash, valuing LSE shares at £32.79. The offer represents a 53 percent premium to the closing price of LSE shares on Aug. 25, four days before OM's initial offer, OM said.
"OM's revised offer continues to represent inadequate value for shareholders and offers no proven benefits for customers," the LSE said.
"OM has failed to address the serious concerns we have raised about their technology, financial track record and ownership control and governance," LSE chairman Don Cruickshank said in a statement. He said the proposal offered LSE shareholders "two unattractive alternatives: either even more shares of uncertain value or cash and even less influence."
The Swedish company, the world's first publicly traded stock exchange operator, had in August offered £27.19 per share, or £808 million, in cash and shares but the company's share price has fallen since it made that offer. At Thursday's closing price of 369 Swedish crowns, OM's first offer for the LSE was worth only £23.41 per share.
 In London Friday LSE stock rose 6.8 percent to £28.30, well below the new offer price, indicating that investors weren't convinced the hostile bid would succeed. Stockholm-traded OM fell 5.7 percent to 348 crowns.
The Association of Private Client Investment Managers and Stock Brokers, a British trade body for brokers serving individual clients, recommended members vote to retain a 4.9 percent limit on the stake that any single holder can have in the LSE's equity. The association's members own about one third of the LSE's votes.
Shareholders are set to meet Oct. 19 to vote on a proposal to scrap the ownership limit, and have until Oct. 27 to decide on the OM bid.
UBS Warburg, LSE's largest shareholder with a 3.4 percent stake, still does not endorse OM's bid, according to sources close to the investment bank, as quoted by Reuters.
"The market doesn't think this bid will succeed," said an analyst who wished to remain anonymous. "As long as this 4.9 percent limit stays in place nothing will happen."
But OM Chief Executive Per Larsson told CNNfn he believed LSE shareholders would support the new bid.
"We have listened to the shareholders." Larsson said. "They like our technology, management and strategy but they wanted more money and cash."
LSE proclaims independence
OM's hostile bid dashed plans by the London Stock Exchange to merge with German rival Deutsche Boerse and cost LSE Chief Executive Gavin Casey his job. The LSE rejected OM's original offer as "derisory" and has told investors it plans to develop an independent strategy.
"LSE has failed its shareholders with its inability to deliver a strategy to face up to the commercially competitive world it inhabits," Larsson said. " This increased offer for LSE with its substantial cash component demonstrates our determination to win."
OM said under the new proposal LSE shareholders could end up with as much as 33 percent of the enlarged OM group, as opposed to the previous offer of 18.5 percent.
Analysts believe that rival offers for the LSE could come from other exchanges, including Deutsche Boerse, Euronext NV and Nasdaq. Euronext, formed by the merger of the Paris, Amsterdam and Brussels exchanges, said it was watching the situation closely.
Bourses have been facing pressure to merge to provide cheaper and easier trading of stocks from across the region, in response to challenges from newer securities trading mechanisms, such as electronic networks. 
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