New Nasdaq Tack On LSE May Hurt Hedge Funds

Dec 12 2006 | 9:58am ET

The Nasdaq Stock Market launched a hostile takeover of the London Stock Exchange this morning in a move that may burn hedge funds that have recently poured money into LSE shares.

With the $5.3 billion bid, Nasdaq is offering the same price per share it announced in January, and that the LSE rejected as too low. The New York-based Nasdaq says it will not raise its offer unless it is outbid or LSE allows a friendly approach.

Nasdaq has also ditched its plan for a full takeover of the LSE, opting instead for easier-to-achieve effective control. Nasdaq said its bid will become unconditional if it receives acceptances from owners of just over half of the LSE’s shareholders, a road smoothed by the fact that Nasdaq already owns almost 30% of the LSE. Previously, the Nasdaq sought the approval of 90% of LSE shareholders, as required under British law, to force out the remaining investors and take a company private.

In other words, Nasdaq may not need to win over—financially or otherwise—the hedge funds that own an estimated one-third of LSE shares to win control. Hedge funds investing in the LSE were expected to demand a better price than that Nasdaq is offering.

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