Nasdaq Fails in Bid for London Stock Exchange

The Nasdaq Stock Market on Friday offered to pay $4.2 billion in cash to buy the London Stock Exchange, but its bold bid to create the first major transatlantic stock exchange company was quickly rebuffed.

The London Stock Exchange said it rejected the surprise bid as too low. The offer’s per-share value is 8% more than the exchange’s current share price.

It was the third bid the exchange has drawn in 15 months, and it may not be the last. The New York Stock Exchange -- the world’s largest and Nasdaq’s archrival -- was rumored as a potential buyer.

Nasdaq’s proposal comes two days after NYSE Group Inc., owner of the Big Board, went public by sealing its purchase of electronic rival Archipelago Holdings Inc. News of its offer to buy the London exchange sent its shares up $4.06 to $43.56.

“From Nasdaq’s perspective, it’s probably good timing to come in with an offer now while NYSE is early in being listed and still getting to grips with the Archipelago merger,” said Andrew Mitchell, an analyst with Fox-Pitt, Kelton.

Nasdaq, the No. 2 U.S. stock exchange, said it would seek “constructive discussions” with the board of the London exchange with the aim of reaching a recommended offer for shareholders. It expressed confidence that it would announce a transaction in the near term.

The NYSE declined to comment when asked if it would make a counter-bid for the London exchange. Securities exchanges are in consolidation mode around the globe, with European exchanges circling one another in vain as pressure to cut costs and fees intensifies.

The London exchange, led by Chief Executive Clara Furse, is viewed as a target partly because, unlike its main rivals, it has no derivatives platform.

Last month the exchange fought off a bid from Australia’s Macquarie Bank Ltd., and Deutsche Boerse withdrew its interest last March.