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Following meetings yesterday and today between the LSE, OM and their respective advisers, the Board of the LSE believes that OM's proposal is significantly less attractive than the proposed merger with Deutsche Börse AG ("DBAG") in creating benefits for customers and value for shareholders.
The proposal is considered to have no merit for two reasons: it constitutes an inferior business proposition, and it offers wholly inadequate value for shareholders.
Inferior business proposition
OM's proposal does not offer customers and shareholders the benefits provided by the merger of LSE and DBAG to form iX-international exchanges.
No European consolidation
It would not create a strong European presence that provides access to liquidity in a wide range of equities. OM's equity market interests amount to only 5 per cent of the Eurotop 300 by weighted market capitalisation. LSE's and DBAG's equity market interests amount to 34 per cent and 12 per cent respectively. iX-international exchanges is in discussion with other exchanges to broaden this pool of liquidity and further remove duplicate structures and market complexity.
It would not provide a strong position in the European derivatives market. OM's position in the derivatives market lags that of Eurex (Germany/ Switzerland), Liffe (UK), Matif and Monep (France) and AEX (Netherlands).
Lower cost savings
OM said that it expects to achieve lower cost savings to those achievable from the alternative combination with DBAG, but was unable to quantify either these or any other benefits.
The Board believes that a collaborative approach to restructuring financial markets, as proposed by the LSE and DBAG, remains the best way to reduce complexity and cost for customers and to deliver value for shareholders.
Wholly inadequate value
Derisory offer
OM proposed an offer comprising £20 in new OM shares and £7 in cash for each LSE share. The last traded price for the LSE's shares was £23.50 at close of business on 25 August.
Commenting, Don Cruickshank, Chairman of the London Stock Exchange, said today: " We have no hesitation in rejecting OM's approach which we believe is significantly less attractive than our proposed merger with Deutsche Börse to create iX-international exchanges. For our shareholders, the offer value is derisory. For our customers, the proposal fails to provide the benefits which will arise from achieving critical mass in European securities.
"We urge our shareholders and our customers not to be distracted by this approach which amounts to no more than a competitive spoiling tactic. We continue to urge our shareholders to support the Board and vote for the proposed merger with Deutsche Börse at the meetings on 14 September."
