The Board of the London Stock Exchange Group plc (the "Exchange") notes the issue of Nasdaq's second circular today. The Board continues to reject Nasdaq's wholly inadequate offer.
The Board believes it is increasingly clear that Nasdaq’s interests are not aligned with those of other shareholders. Nasdaq’s self-serving criticism of the Exchange’s growth prospects underlines its obvious need to acquire it - albeit on the cheap. The document published by Nasdaq today is once again long on rhetoric and short on valuation arguments.
Value
The Board of the Exchange wishes to emphasise the following facts:
- The December 2006 PE multiples for Deutsche Boerse and Euronext are 25.5x and 30.8x respectively compared to Nasdaq's offer for the Exchange of 24.4x
- The December 2007 PE multiples for Deutsche Boerse and Euronext are 23.1x and 27.4x respectively compared to Nasdaq's offer for the Exchange of 20.7x (as disclosed in Nasdaq’s circular of 8 January 2007)
- The December 2006 and 2007 average PE multiples for global exchanges are 40.0x and 31.4x respectively
- Nasdaq continues to refuse to disclose the level of synergies that it expects to realise from a merger, which analysts have estimated at £49 million per year before tax
- The December 2006 PE multiple of Nasdaq’s offer of 24.4x is well below the 29.8x it offered in its withdrawn proposal for the Exchange in March 2006 and the 30.0x offered to Euronext shareholders in its agreed merger with NYSE
Exchange performance
We are pleased that Nasdaq acknowledges the superiority of the Exchange’s performance in attracting new international listings. Indeed, IPOs on AIM alone raised a similar amount of new capital to that raised on the whole of Nasdaq in 2006.
The Board of the Exchange published a re-forecast of SETS trading for the 2008 financial year after considerable analysis and care. The Exchange is significantly exceeding the SETS targets issued in February 2006 and is confident that it will achieve the revised target of at least 480,000 average trades per day. Indeed, as set out in our circular of 18 January 2007, shareholders should note that in the first 10 trading days of this month, SETS has achieved an all time trading record and has averaged almost 400,000 trades per day.
While Nasdaq acknowledges that the Exchange has achieved growth in its Broker Services business, Nasdaq has, in five of the last six months, lost market share in trading of its own listed securities.
Nasdaq’s statement on discussions is incorrect
At no stage has Nasdaq attempted to pursue any constructive discussion with the Exchange. In November 2006, it simply made public a second unsolicited approach – this time at an even lower multiple than its previous approach. Since announcing its offer, Nasdaq has made no attempt to contact the Exchange. As Nasdaq continues to offer entirely the wrong price, the Board of the Exchange has been forced to conclude that it is not in shareholders' interests to engage with Nasdaq. The Board continues to explore opportunities that would expedite the full realisation of its vision to be the world’s capital market and deliver increasing value to shareholders
Clara Furse, Chief Executive Officer of the Exchange, commented:
“The Exchange’s trading growth has exceeded that of all major listed equity and derivatives exchanges in Europe and the United States. Nasdaq’s approach is clearly intended to undermine the perception of the true value of the London Stock Exchange. Our shareholders deserve more.”
Chris Gibson-Smith, Chairman of the Exchange, commented:
“The Board firmly believes that Nasdaq’s offer does not even give standalone value. The Board will continue to defend steadfastly shareholders’ interests and we await any indication from Nasdaq regarding an offer price that the Board could recommend to shareholders. It is time for Nasdaq to shut up or put up.”
