[B] London Stock Exchange confirms merger talks with Nasdaq
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By Nandini Sukumar, BridgeNews
London--Apr 25--The London Stock Exchange confirmed to BridgeNews on Tuesday
morning that it was talking to the US growth stock exchange Nasdaq, about a
possible alliance. "We are talking to a number of possible merger partners," a
spokesman for the London Stock Exchange said. "Deutsche Boerse and Nasdaq are
the two we have acknowledged."
* * *
The Nasdaq disclosure, spawned by weekend press speculation, comes after the
the LSE revealed last Thursday that it is at a critical stage in discussions
regarding a possible merger with Germany's Deutsche Boerse.
The LSE had only confirmed it was in talks with the German Exchange a few
hours earlier.
While the London Stock Exchange would not reveal any further details this
morning, including the form an alliance with Nasdaq would take, the Wall Street
Journal Europe reported Tuesday a combined LSE-Deutsche Boerse would form a
joint venture with the US exchange.
The WSJE reported that the venture would not go as far as a full merger
although Nasdaq could take an equity stake and shares could be swapped.
The WSJE also said the Nasdaq alliance could involve rebranding Germany's
Neuer Markt for growth stocks as Nasdaq Europe.
However, the UK's Sunday Times reported the LSE has been holding parallel
talks with the Nasdaq. The negotiations are expected to result in a three-way
merger rather than an alternative to the Anglo-German merger.
On Nov 5, the new Nasdaq-Europe said it would join other Nasdaq markets in
the US and Asia by late 2000. Frank Zarb, chairman and chief executive of the
National Association of Securities Dealers (NASD) said the three markets should
come together by end-2000, interconnecting to provide a vast and liquid market
for IPOs.
Zarb joined Masoyashi San, founder and CEO of Softbank Corp of Japan,
Jean-Marie Messier, chairman and CEO of France's Vivendi, and Rupert Murdoch of
News Corp to launch the new market in Europe.
Approximately 15 UK, Continental and American financial firms are expected
to become equity participants and co-owners of the market.
The market will also allow investors to exchange traded fund and index
products such as the Nasdaq-100 Index Tracking Stock and Eurotop stocks.
Nasdaq-Europe, which is modeled on the US Nasdaq stock market, also said at
the time it is talking to other institutions and exchanges, including EASDAQ,
about possible inclusion in the new venture.
Conjecture about the details of the proposed merger is rife with the German
financial daily Handelsblatt reporting, without citing sources, that the
headquarters of a merged Frankfurt and London stock exchange would be in London.
The two exchanges are also discussing whether the clearing and settlement
businesses should be excluded from the merger, which would make the merger of
equals demanded by LSE possible, the paper reported.
One issue thought to have been resolved is the future of Deutsche Boerse's
settlement joint venture, Clearstream, created by a merger between the German
exchange's own settlement arm and Cedel, an international clearing house.
London officials, backed by the big securities houses, had been insisting
that the clearing house either be included in the merger at no cost--effectively
declaring it to be a non-profit-making subsidiary--or excluded.
"We have contended that clearance and settlement should be a non-profit
utility," the Sunday Times quotes one senior broker from an investment bank as
saying.
On Thursday an internal note faxed by mistake by the LSE outlined the
strategy for LSE officials regarding the merger.
It said that if a merger was agreed, it should be stressed that the deal was
a watershed moment for Europe's exchanges, and the LSE would be at the heart of
an alliance which would strengthen London as a financial center.
The document acknowledged, however, that a merger could be seen as Frankfurt
taking over the LSE.
The internal document also outlined the strategy if merger talks were
aborted.
It said the reasons that might be given for a failure of talks could
include a failure to agree on regulatory issues, the lack of a shared vision and
that a deal would not be in the best interest of London or LSE customers.
Deutsche's Werner Seifert is expected to be chief executive of the merged
group while newly appointed LSE chairman Don Cruickshank is expected to become
Chairman.
Don Cruickshank, the newly appointed chairman of the London Stock Exchange,
said on Thursday his immediate objective is to continue discussions with
Deutsche Boerse with a view to merging Europe's two largest stock exchanges.
He said consolidation among European exchanges was being encouraged by the
major institutional traders, who are seeking lower costs and more efficient
trading.
"Some of the principal customers have made it clear that rationalization of
securities trading across Europe and beyond is needed," Cruickshank told Bridge
News in an interview.
A dual announcement by the LSE on Thursday morning said Cruickshank would
take over from John Kemp-Welch as LSE chairman on May 25, and confirmed the LSE
is holding merger talks with Deutsche Boerse.
Cruickshank said he was approached by the LSE's search committee in late
January and has been updated on the merger talks with Deutsche over the past two
weeks, although he said he had not been directly involved.
He declined to comment on the status of the discussions, nor on the
likelihood of a deal being struck. End
Bridge News, Tel: +44 171 842 4298
Send comments to Internet address equity@bridge.com
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