Exchange in London Delays Merger Vote

Seeking to ward off a hostile takeover bid from a Swedish company, the London Stock Exchange on Tuesday postponed a shareholder vote on its plan to merge with Germany’s Deutsche Boerse.

The decision to delay the vote indefinitely was an embarrassing setback for the London exchange, which has been struggling for months to persuade skeptical shareholders of the merits of an Anglo-German union.

The London exchange postponed the crucial vote after rejecting a formal takeover offer earlier in the day from OM Gruppen, the operator of the stock exchange in Stockholm.

OM bid $1.2 billion in cash and shares to take over the much larger London exchange, which last week rejected an informal approach from OM.

“This offer is derisory; it fundamentally undervalues our business and its prospects,” London exchange Chairman Don Cruickshank said in a statement.

The British and German exchanges--Europe’s largest--aim to create a regional bourse big enough to compete with Wall Street in New York. However, many of the London exchange’s small shareholders are concerned the merger would harm their business and are withholding support for the deal.

Officials at the Frankfurt-based Deutsche Boerse refused to comment on London’s postponement of the merger vote. Shareholders in the German exchange are expected to vote by a large margin in favor of the deal. The combined exchange is to be called iX, for International Exchanges.

Pressure is building on Europe’s national stock markets to combine, and some analysts saw OM’s offer as the start of a bidding war for the British exchange.

The Frankfurt exchange said Monday it was prepared to make a counteroffer for the London bourse if OM persisted with its attempts at a hostile takeover.

Nasdaq, the technology-rich U.S. stock market, is another possible bidder, although European Union regulators might block such a bid if U.S. authorities don’t permit a reciprocal takeover of an American stock exchange by a European counterpart, said Graham Bishop, a private consultant on European financial affairs.