London Exchange urges bid rejection

The London Stock Exchange on Tuesday pledged to raise its dividend for next year by at least 50% as it asked shareholders to reject a “wholly inadequate” $5.3-billion hostile takeover offer from Nasdaq Stock Market Inc.

The London exchange issued a bullish profit forecast for 2007, saying it expected its bottom line to rise more than 58%, which it said would support a higher cash dividend.

Chief Executive Clara Furse needs to persuade shareholders not to sell to Nasdaq even as rival exchanges move closer to completing acquisitions that allow them to expand globally or into more profitable businesses.

NYSE Group Inc., parent of the New York Stock Exchange, is nearing completion of its deal to buy European-markets giant Euronext.

Nasdaq last week gave investors until Jan. 11 to accept its offer for the 71.2% of the London exchange it doesn’t already own.

But Furse said Nasdaq’s offer was “wholly inadequate and significantly undervalues the LSE. We continue to urge our shareholders to reject” it.

The Nasdaq bid, which offers shareholders 5.6% less than the London exchange’s closing share price Monday, puts pressure on Furse to consider negotiating.

“The board of LSE is ignoring the elephant in the room at its peril,” Nasdaq CEO Robert Greifeld said in a statement. “Regulatory changes, increased consolidation and customer group competition are likely to bring significant downward pressure on LSE’s revenue model going forward.”

Greifeld has spent $1.68 billion this year for a stake in the London Stock Exchange, which has twice rebuffed his takeover offers.

Nasdaq’s shares fell $1.94 to $34.05 on Tuesday, continuing their slide since late November, amid concerns the firm might fail to buy the London market -- or that it might pay too much.