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LSE shares fall in Deutsche pull out.

Byline: By Iain Laing

Shares in the London Stock Exchange fell 8pc yesterday after Deutsche Boerse scrapped its pounds 1.35bn takeover proposal and fears grew that a rival suitor may also walk away.

The decision by Deutsche to bow to a shareholder rebellion gives Paris-based exchange Euronext a clear run to launch a formal bid for the LSE.

But LSE shares fell below 500p as the City questioned whether Euronext will be able to generate enough support for an offer, particularly as it shares many investors with its German rival.

Deutsche said its decision to withdraw its preliminary offer of at least 530p a share followed talks with its shareholders over the past month. It also cited the opposition of the LSE board which considered its offer to be too low.

It now planned to return a "significant" amount of cash to shareholders, but stressed that its bid could be resurrected if Euronext made a formal move.

Euronext ( a combination of the Paris, Brussels, Amsterdam and Lisbon stock exchanges as well as the Liffe futures market in London ( has remained tight-lipped on what it is willing to pay for the LSE but has outlined potential benefits.

It believes a tie-up could produce 203 million euros (pounds 139.8m) in annual cost savings and increased revenues.

Richard Hunter, head of UK equities at stockbroker Hargreaves Lansdown, said: "Strategically, it seems that Euronext has played its cards right. The main thing in its favour is the fact that there is no bidding war on the horizon."

Numis Securities analyst Justin Bates said the statement meant it was now a "one-horse race" for the LSE and a maximum price of 555p a share would win control.

Deutsche chief executive Werner Seifert said yesterday he was still convinced of the merits of bidding for the LSE. But he added: "At the same time, we recognise that a significant portion of our shareholder base is focused on a return of capital in the short term."

Media reports have suggested that as many as 35pc of investors in Deutsche were opposed to a takeover of the LSE. Some had threatened to force a meeting to overthrow the board if their concerns were not met.

Deutsche announced a 27pc improvement in the annual dividend last month and said yesterday that it was developing a plan with shareholders to return additional funds.

The LSE has long been seen as a target of Deutsche, which has a market value of around pounds 3.1bn, and the two companies were poised to merge four years ago but the LSE said then it was not in its interests.

Last month, the City watchdog warned of "significant" implications for the LSE if a future owner moved it to another country, raising concerns that it might no longer be subject to UK takeover and corporate governance laws.
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Publication:The Journal (Newcastle, England)
Date:Mar 8, 2005
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