Cash Offer Of 580 Pence Per Share By Goldman Sachs International On Behalf Of Macquarie London Exchange Investments Limited ("MLX") And In The United States By MLX For London Stock Exchange Plc ("LSE")

On 8 December 2005, Macquarie announced that it had approached the LSE Board seeking to engage in discussions regarding a possible consortium cash offer of 580 pence per LSE Share. Since then, Macquarie has reviewed information provided under Rule 20.2 of the Code and has held discussions with shareholders of the LSE as well as other key stakeholders in the London market.

Following completion of its due diligence and its initial consultations, Macquarie and its consortium partners have determined that they wish to make a firm offer to the shareholders of the LSE. Accordingly, MLX, a newly-formed English company established for the purpose of acquiring the LSE, today announces the terms of a cash offer for the entire issued and to be issued ordinary share capital of the LSE to be made by Goldman Sachs International on behalf of MLX (outside of the United States) and by MLX in the United States. The Offer is in cash at 580 pence per LSE Share, valuing the entire issued and to be issued ordinary share capital of the LSE at approximately £1.5 billion.

An Attractive, Certain and Deliverable Offer

• MLX believes that the Offer represents attractive value for LSE Shareholders given the substantial speculation that continues to support the LSE share price
• The Offer represents a multiple of:
  • 23.4 times earnings per share before exceptional items and goodwill amortisation for the 52 weeks ended 31 March 2005; and
  • 12.5 times EBITDA before exceptional items for the 52 weeks ended 31 March 2005
• MLX does not anticipate any substantive competition issues arising from its proposal
• Neither MLX nor any of its shareholders require any formal regulatory approvals in respect of their participation in the Offer
• MLX is aware of the regulatory requirements as outlined by the FSA in order to operate the LSE as a Recognised Investment Exchange ("RIE"). Upon completion of the Offer, MLX intends that the LSE will continue to meet the regulatory requirements for ongoing recognition as an RIE

A Committed and Responsible Owner

• MLX has been formed for the purpose of acquiring the LSE. MLX is owned by two Macquarie Group managed/advised funds, Macquarie Financial Infrastructure Fund ("MFIF") and Macquarie Capital Alliance Group ("MCAG") together with Finpro Inversiones, SL
• Macquarie has formed MFIF with a mandate to invest in global financial infrastructure businesses. It is anticipated that the LSE will be the cornerstone investment of MFIF

  Macquarie Investment Management (UK) Limited ("MIM(UK)"), under a management agreement the investment adviser to MFIF, brings considerable management and advisory expertise to MFIF and currently manages approximately £3.5 billion of assets, including investments in essential service and infrastructure assets throughout Europe

• MFIF will provide the strategic, operational and financial expertise necessary to ensure that the LSE has the capacity to play a leading role in the global exchange landscape, commensurate with its status as one of the world's largest capital markets
• Macquarie is a global investor with a track record of long-term investment in infrastructure and essential service businesses that operate within regulated environments around the world

A Stable and Focused Future for the LSE

• LSE stakeholders are expected to benefit from a more stable and sustainable ownership structure. In particular, MLX intends that:
• The LSE will continue to be headquartered and managed in London
• The LSE will continue to be regulated solely by the FSA
• Customer representation will continue at appropriate operating committees
• The LSE Board will continue to have a majority of independent non-executive directors
• MLX is committed to maximising liquidity in all of the LSE's markets
• MLX has no intention to increase average prices for broker services MLX ownership will avoid the potential commercial conflicts of interest consequent upon ownership by another European stock exchange

Preserving and Enhancing the LSE's Position

• The LSE is the largest cash equity exchange in Europe and a pillar of the global capital markets. MLX will provide access to the strategic, operational and financial expertise necessary to maintain and build upon this pre-eminent position
• The LSE attracts international and domestic companies, capital flows, highly skilled people and financial services organisations to London, creating significant economic and social benefits for London and the UK
• MLX ownership should ensure that the benefits that the LSE brings to London and the UK will be preserved

The Offer provides an opportunity to resolve the recent distracting period of uncertainty for the LSE. This resolution will be good for the London markets, the LSE and its stakeholders.

MLX regrets that the Board of the LSE has refused to engage in substantive discussions despite the terms proposed by MLX. While MLX will continue to seek a recommendation from the Board of the LSE, MLX believes that it is important that LSE Shareholders are fully informed of MLX's interest and the full terms of its cash offer.

Commenting on the Offer, Jim Craig, Director, MLX and Head of Macquarie Europe, said:

"MLX considers that its offer for the LSE represents attractive value for LSE Shareholders. MLX will be a committed owner of the LSE and will provide access to the expertise necessary to develop the LSE to its full potential for the benefit of stakeholders."

Macquarie Lon Ex Inv Offer for LSE - Part 2

Macquarie Lon Ex Inv Offer for LSE - Part 3