NEW YORK, Jan. 18, 2007 (PRIME NEWSWIRE) -- The Board of The Nasdaq Stock Market, Inc. ("NASDAQ") notes the publication of a new document (the "Circular") by London Stock Exchange Group plc ("LSE") earlier today.
NASDAQ would draw LSE Shareholders' attention to the fact that LSE:
* fails to provide a long-term strategic vision;
* announces a marginal return of capital;
* shows renewed complacency with respect to Project Turquoise;
* on our analysis, fails to take adequate account of the impact
of competition on future SETS volumes; and
* fails to provide any new visibility on its cost base and
deploys weak arguments on standalone value.
Accordingly, LSE fails to present any information which changes NASDAQ's belief that without NASDAQ your LSE Shares would be worth far less.
Lack of strategy
LSE again fails to provide a long-term strategic vision for the business and focuses purely on short term reactive initiatives. Despite considerable press speculation about a potential strategic alternative to a combination with NASDAQ we note that LSE remains unable (or unwilling) to identify, let alone consummate, an alternative transaction which would increase liquidity, provide synergies and diversify the business.
Marginal return of capital
The LSE share buyback proves that LSE would rather weaken its strategic position through reactive tactics than set out a clear vision for the business. The amount proposed is less than half that given to shareholders in the defence to the Macquarie bid, which valued ordinary shares at c. 36 per cent. of NASDAQ's Ordinary Offer. We would also draw LSE Shareholders' attention to the fact that LSE only returns capital when it needs their support: including the amount announced today c. 76 per cent. of LSE's distributions over the last three years is in direct response to unsolicited bids.
Renewed evidence of complacency
LSE characterizes Project Turquoise, an alternative equity market platform backed by seven investment banks, as "the ninth new UK equity trading platform in the last seven years". We regard this as clear evidence of LSE's failure to recognize the significance of the initiative -- have any of the previous rivals been established and owned by parties responsible for c. 50 per cent. of the trading volume on LSE?
Impact of competition on SETS volumes
NASDAQ believes that LSE fails to take adequate account of the impact of competition on future SETS volumes. We anticipate that LSE would argue that its projections are robust based on the outperformance of historic targets. LSE's projections can only be proven through the passage of time, but one fact is irrefutable -- in its announcements this week LSE has introduced trading fee reductions which are certain to have a negative impact on its revenue and profitability whilst promising volume increases whose counterbalancing impact is uncertain. In combination, these factors dramatically increase the risk profile for LSE Shareholders.
The negative impact of pricing cuts on the LSE value case further strengthens NASDAQ's belief that 1,243 pence per Ordinary Share is a full and fair price and highlights the downside risk to the LSE share price were NASDAQ's offers to lapse and the share to revert to a valuation based on fundamental drivers.
No new information and weak arguments on standalone value
LSE fails to provide any new visibility on its cost base or indeed any of its other business drivers. Instead LSE again argues that it should be compared to a global exchange sector including a diverse set of peers. This methodology is sustained by reference to the fairness opinions provided in transactions where the target -- the Sydney Futures Exchange, Euronext, the New York Board of Trade and the Chicago Board of Trade -- is either a pure or hybrid derivatives exchange, businesses which are subject to completely different growth drivers to LSE, a pure cash equities business. The fact that European exchanges represent the appropriate peer group is acknowledged by the vast majority of analysts, including the analyst at LSE's lead financial adviser Merrill Lynch.
NASDAQ continues to believe that 1,243 pence per Ordinary Share represents a full and fair price for your LSE shares.
OFT announcement
NASDAQ is pleased to note the announcement made by the Office of Fair Trading ("OFT") earlier today that the OFT has decided not to refer NASDAQ's offer for LSE to the Competition Commission. The decision is consistent with NASDAQ's view that a combination will yield benefits to LSE stakeholders.
Commenting on the Circular, NASDAQ President and CEO Robert Greifeld said:
"The only significant new information from LSE this week is its plan to cut trading revenues through price reductions. This belated nod at its customers is likely to be the first of many such reductions. These tariff cuts will be wrung out of LSE through customer pressure and competitive action and will have a profound impact on LSE profitability and on the value of an LSE share."
Important information on NASDAQ's Final Offers
NASDAQ wishes to clarify its position under the City Code ("Code"). Under Rule 32.1 of the Code, NASDAQ is unable to revise its offers after Day 46 of its offer period, in this case Saturday 27 January 2007, unless (i) the Board of LSE recommends the Final Offers; or (ii) if a firm intention to make a competing offer for LSE is announced (whether or not subject to any preconditions), and in each case the Panel grants an extension to the offer timetable which resets Day 46 and Day 60. NASDAQ announces that after midnight on Day 46, in this case Saturday 27 January 2007, NASDAQ's Final Offers will not be revised upon the recommendation of the LSE Board.
LSE Shareholders are urged to accept the Final Offers as you, rather than the LSE Board, will determine whether the Final Offers will be implemented.
LSE Shareholders who have not yet accepted the Final Offers and who hold LSE Shares in certificated form (that is, not through CREST) should complete, sign and return the relevant Form(s) of Acceptance in accordance with the instructions thereon and the instructions in the Offer Document as soon as possible and, in any event, so as to be received no later than 3.00 p.m. (London time) on 26 January 2007.
LSE Shareholders who have not yet accepted the Final Offers and who hold LSE Shares in uncertificated form (that is, through CREST), should submit a TTE instruction in accordance with the instructions in the Offer Document for settlement as soon as possible and, in any event, by no later than 3.00 p.m. (London time) on 26 January 2007.
Copies of the Offer Document, the Response Document and Forms of Acceptance are available for collection (during normal business hours only) from Capita Registrars, The Registry, 34 Beckenham Road, Beckenham, Kent BR3 4TU, United Kingdom and Greenhill & Co. International LLP at Lansdowne House, 57 Berkeley Square, London W1J 6ER, United Kingdom. The Offer Document and the Response Document are also available on www.nasdaq.com.
Save as defined above, capitalised terms used in this announcement have the same meaning as in the Offer Document dated 12 December 2006 and NASDAQ's announcement dated 8 January 2007.
* The Final Offers will not be revised except that NAL reserves the right to revise the Final Offers: (i) upon the recommendation of the LSE Board; or (ii) if a firm intention to make a competing offer for LSE is announced, whether or not subject to any preconditions. NASDAQ announces that after midnight on Day 46, in this case Saturday 27 January 2007, NASDAQ's Final Offers will not be revised upon the recommendation of the LSE Board.
Any references to Offers, offers, Offer, offer, Final Cash Offers or Final Offers in this announcement refer to the Final Offers as defined in the Offer Document dated 12 December 2006.
Sources and Bases
The reference to Macquarie's offer valuing the LSE ordinary shares at 36 per cent. of NASDAQ's Final Offers is based on the Macquarie offer price of 580 pence as adjusted for the capital return.
Capital distributions as a direct response to unsolicited bids as per cent. of total capital returned in the last two and a half years has been calculated as sum of the share buyback announced by LSE today, the return of capital in response to the Macquarie bid and the total share buyback announced in response to the Macquarie bid as a proportion of total capital returned (including interim and final dividends).
The reference to the Merrill Lynch analyst acknowledging that European exchanges represent the appropriate peer group for LSE is based on the Merrill Lynch research reports from 31 October 2006 and 22 September 2006.
The reference to Project Turquoise's equity trading market share is sourced from the Wall Street Journal, 15 November 2006.
THIS ANNOUNCEMENT IS NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION IN OR INTO AUSTRALIA OR CANADA
Greenhill & Co. International LLP, which is authorised and regulated in the United Kingdom by the Financial Services Authority, is acting exclusively for NASDAQ and NAL and for no-one else in connection with the Final Offers and will not be responsible to anyone other than NASDAQ and NAL for providing the protections afforded to clients of Greenhill & Co. International LLP or for giving advice in relation to the Final Offers. Dresdner Kleinwort Securities Limited, which is authorised and regulated in the United Kingdom by the Financial Services Authority, is acting exclusively for NASDAQ and NAL and for no-one else in connection with the Final Offers and will not be responsible to anyone other than NASDAQ and NAL for providing the protections afforded to clients of Dresdner Kleinwort Securities Limited or for giving advice in relation to the Final Offers.
This announcement does not constitute an offer to sell or an invitation to purchase any securities or the solicitation of an offer to buy any securities, pursuant to the Final Offers or otherwise. The Final Offers are being made solely by the Offer Document and, in respect of shares held in certificated form (that is, not through CREST), the Forms of Acceptance accompanying the Offer Document, which contain the full terms and conditions of the Final Offers, including details of how the Final Offers may be accepted.
Unless otherwise determined by NAL, the Final Offers are not being, and will not be, made, directly or indirectly, in or into or by the use of the mails of, or by any means or instrumentality (including, without limitation, facsimile transmission, telex, telephone or e-mail) of interstate or foreign commerce of, or by any facilities of a national securities exchange of, Australia or Canada or any jurisdiction where to do so would violate the laws of that jurisdiction and will not be capable of acceptance by any such use, means, instrumentality or facility or from within Australia or Canada or any such jurisdiction. Accordingly copies of this announcement are not being, and must not be, directly or indirectly, mailed or otherwise forwarded, distributed or sent in, into or from Australia or Canada or any such jurisdiction, where to do so would violate the laws of that jurisdiction and persons receiving this announcement (including, without limitation, custodians, nominees and trustees) must not mail or otherwise distribute or send it in, into or from such jurisdiction as doing so may invalidate any purported acceptance of the Final Offers. Any person (including, without limitation, any custodian, nominee or trustee) who would, or otherwise intends to, or who may have a contractual or legal obligation to forward this announcement and/or the Offer Document and/or any related document to any jurisdiction outside the United Kingdom and the United States should inform himself of, and observe, any applicable legal or regulatory requirements of that jurisdiction.
In accordance with the City Code, normal United Kingdom market practice, and subject to applicable regulatory requirements and pursuant to exemptive relief granted by the US Securities and Exchange Commission from Rule14e-5 under the US Securities Exchange Act of 1934, (i) Dresdner Kleinwort Securities Limited and/or its affiliates will continue to act as connected exempt principal traders in LSE Shares on the London Stock Exchange and may from time to time make certain purchases of, or arrangements to purchase, LSE Shares or futures contracts or indices over LSE Shares outside the United States, other than pursuant to the Final Offers, before or during the period in which the Final Offers remain open for acceptance, and (ii) NAL, its affiliates, or their respective nominees or brokers (acting as agents), may from time to time make certain purchases of, or arrangements to purchase, LSE Shares outside the United States, other than pursuant to the Final Offers, before or during the period in which the Final Offers remain open for acceptance. These purchases may occur either in the open market at prevailing prices or in private transactions at negotiated prices. These purchases, or arrangements to purchase, shall comply with applicable rules in the United Kingdom, including the City Code, the rules of the UK Listing Authority and the rules of the London Stock Exchange and applicable US securities laws (except to the extent of any exemptive relief granted by the US Securities and Exchange Commission from Rule 14e-5). Any information about such purchases will be disclosed as required in the United Kingdom pursuant to the City Code and will be available from the Regulatory Information Service of the UK Listing Authority and will be available in the United States at www.nasdaq.com.
The NAL Directors and the NASDAQ Directors accept responsibility for the information contained in this announcement, save that the only responsibility accepted by them in respect of information in this announcement relating to LSE, which has been compiled from public sources, is to ensure that such information has been correctly and fairly reproduced and presented. Subject as aforesaid, to the best of the knowledge and belief of the NAL Directors and the NASDAQ Directors (each of whom has 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.