Australian Bank Stirs Hopes of Lse Fight

Hopes of a bidding war for the London Stock Exchange were ignited yesterday after ambitious Australian bank Macquarie admitted it might form a consortium to make an offer for the busiest stock market in Europe.

After a weekend of speculation, Macquarie was forced to admit to its interest in the LSE but cautioned there was "no guarantee" a bid would be made. Even so, the LSE's shares rose 26p to 578p - in part because the City believed the surprise emergence of Macquarie could force Dutch-French combine Euronext to pay a higher price.

There was also speculation that OM Gruppen, the Swedish market that tried unsuccessfully to take over the LSE four years ago, was also considering a bid, but it refused to make any comment.

A potential offer by Euronext, which owns exchanges across Europe, is being evaluated by the Competition Commission, as is one by Deutsche Börse. The German exchange, though, may now find it difficult to proceed with an offer after its chief executive Werner Seifert was forced to resign in the face of shareholder opposition to the plan. The competition regulator has asked Euronext and Deutsche Börse to address its concerns that a takeover of the LSE would lead to a "substantial lessening" of competition by Thursday this week, although this deadline may be extended if the commission is successful in gaining an extension to its inquiry to November from mid-September.

Euronext has not yet put a price on any bid it might make, although City sources believe it is considering the possibility of making a cash and shares offer. All its public comments in the past have discussed only a cash offer.

This contrasts with the 530p a share in cash that Deutsche Börse had originally been prepared to pay and the cash-only offer that Macquarie said yesterday it might put on the table for LSE shareholders.

The LSE is reported to be determined not to sell out for anything less than 600p a share. It told the City yesterday that it had confidence in its "growth prospects as an independent group" and insisted it had not received a formal approach from Macquarie.

This, however, did not rule out the possibility that the Australian bank had made informal approaches to the LSE.

Despite the intervention of Macquarie, analysts still believe that the most likely bidder was Euronext.

"I still see Euronext as the only credible bidder," said Katrina Preston, an analyst at Bridgewell, although she cautioned that Euronext might face opposition from its own shareholders too about the price it might be forced to pay to take control of the LSE.

Ms Preston also voiced the views of many who questioned the price that Macquarie might be able to pay. "There are potentially huge cost-savings from [exchanges merging]. I can't imagine that Macquarie could justify the price that Euronext does," she said.