Press releases 2005
15 December 2005
Rejection of unsolicited offer from Macquarie Consortium
The Board of London Stock Exchange plc (“LSE”) has noted the confirmed offer from Macquarie of 580p per share and has unanimously rejected this derisory offer which fundamentally undervalues the Company given its unique franchise, attractive long-term growth prospects and pivotal position in global capital markets.
Macquarie’s offer is at a discount to the LSE’s standalone value before any takeover premium
The Board of the LSE is convinced that the Macquarie offer is at a discount to the LSE’s standalone value before any takeover premium. The offer disregards the quality and strength of the LSE’s business, its long-term growth prospects and the re-rating of the global exchange sector.
Since 26 October 2004, the share prices of the eight largest exchanges, apart from the LSE, have risen by between 71% and 452%. The offer values the LSE at a discount to Deutsche Borse and Euronext which are trading on pro forma March 2006 price/earnings consensus multiples of 21.2x and 20.8x respectively compared to a consensus multiple of 18.9x for the LSE at the offer price. In the past three years, the LSE has often traded at price/earnings multiple premia to Deutsche Borse and Euronext.
The LSE believes that the Macquarie offer has been set at a level that will help Macquarie maintain its own and its funds’ performance and reflects the absence of synergies and its attempt to assuage customer concerns.
The LSE is delivering outstanding and accelerating growth and cashflow generation
The strong Interim Results and subsequent monthly market reports underline the success of the LSE’s strategy and confirm the Board’s confidence in the LSE’s growth prospects as an independent group.
Infolect, the LSE’s new high performance delivery system that carries real time market data to customers, was successfully implemented in September 2005 and marks an important milestone in the LSE’s Technology Road Map, a four year project to deliver next generation technology. Infolect provides a 15 times faster service, with a step-change in the capacity to support future market growth and increase message volumes, at a tenth of the development cost of the previous system. This will produce significant and on-going performance benefits for customers and continuously improve market quality. There are already clear signs of the positive impact of Infolect on volume growth.
The LSE has also announced its intention to undertake a return of capital to shareholders of £250 million and to commence an ongoing share buyback programme following the return of capital. This would mean that the LSE will have returned to its shareholders the equivalent of 162 pence per share since August 2004, excluding dividends.
The LSE has also committed to maintain operating costs in the financial year to March 2007 at the same level as in the financial year to March 2006 and will maintain its rigorous control of costs going forward.
The LSE is a unique and highly attractive business
The LSE has a pivotal position at the centre of global capital markets. Some 25% of the FTSEurofirst300 companies have their primary listings in London and the LSE is the pre-eminent force in international listings with a 39% market share amongst major exchanges in 2005. Macquarie’s cash offer denies shareholders the right to participate in the consolidation opportunities which are now emerging in the exchange sector.
Given the underlying strength of the business, the quality and value of the LSE brand and technology, and the actions outlined above, the Board believes that the LSE will deliver significant and increasing value for shareholders. Macquarie’s offer entirely fails to recognise the value of the LSE and the nature of its business.
Accordingly, the Directors of the LSE, who have been so advised by Merrill Lynch and Lehman Brothers, consider the offer wholly inadequate and advise LSE’s shareholders to reject the offer.
For further information:
LSE John Wallace – Media 020 7797 1222
Paul Froud – Investor Relations 020 7797 3322
Merrill Lynch Matthew Greenburgh 020 7628 1000
Lehman Brothers Anthony Fry 020 7102 1000
Finsbury James Murgatroyd 020 7251 3801
Sources and bases:
The historic financial information relating to LSE (including in respect of the capital return, share buyback programme and cost control) in this announcement is based on information contained in LSE’s interim report for the six months ended 30 September 2005.
All earnings estimates and price/earnings multiples for LSE, Deutsche Borse and Euronext are calculated from analyst consensus earnings estimates sourced from Reuters for December 2005 and December 2006 and calendarised to a March year end where applicable. Share price data sourced from Bloomberg.
The eight largest exchanges referred to in the announcement exclude CBOT as it was not publicly listed on 26 October 2004.
Calculation of per share return of capital figure adjusted to account for the 6 for 7 share consolidation with effect from 26 July 2004.
Information regarding the FTSEurofirst300 sourced from FTSE European Monthly Review October 2005 and market share information relating to international listings sourced from the LSE, NYSE, NASDAQ, Deutsche Borse and Euronext’s respective websites.
The Directors of the LSE accept responsibility for the information contained in this announcement. To the best of the knowledge and belief of the Directors of the LSE (who have taken all reasonable care to ensure that such is the case), the information contained in this announcement for which they accept responsibility is in accordance with the facts and does not omit anything likely to affect the import of such information.
Merrill Lynch International, which is regulated in the United Kingdom by the Financial Services Authority, is acting exclusively for LSE and no one else in connection with the offer and will not be responsible to anyone other than LSE for providing the protections afforded to clients of Merrill Lynch International nor for providing advice in relation to the offer.
Lehman Brothers Europe Limited, which is regulated in the United Kingdom by the Financial Services Authority, is acting exclusively for LSE and no one else in connection with the offer and will not be responsible to anyone other than LSE for providing the protections afforded to clients ofLehman Brothers Europe Limited nor for providing advice in relation to the offer.