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February 20: Macquarie has decided not to raise its offer for the London Stock Exchange. effectively throwing in the towel on its hostile bid. It says that, after discussions with LSE shareholders, it has concluded that “an increased offer on terms acceptable to MLX [the Macquarie-led consortium] and its investors is unlikely to be acceptable to LSE shareholders”. Macquarie had offered 580p; this morning LSE shares were trading above 840p. The LSE’s defence document last week showed it could do similar things with its balance sheet as Macquarie was proposing but to the advantage of its own shareholders. Neither Macquarie nor its adviser Goldman Sachs looks very smart – having earlier advised Deutsche Börse, this is Goldman’s second tilt at the LSE. The question now is how long it will be before one of the American exchanges - the NYSE or Nasdaq- has a go. The economic benefits might be considerable, but so would the regulatory obstacles.
The government has reclassified London & Continental Railways, the company building the Channel Tunnel Rail Link and which Sir Adrian Montague is trying to buy. Instead of being regarded as a private sector company over which the government exercises strong influence, it will now be a public sector enterprise. The timing is odd and it isn’t yet clear what this would mean for Sir Adrian, an ex-Treasury adviser, and his team. However, wouldn’t it be tidy if a consortium of Treasury alumni were to take LCR’s £5bn of debt straight back off the government’s books.
We’re keeping close tabs on the BOC/Linde bid situation. Despite speculation over the weekend that a revised bid may be very close, we think the talks have some way to go, as Richard Milne reported in Saturday’s paper. It’s a bit like waiting for the main verb in German: you know it’s coming; you just have to hang on a bit.
We’ll do more tonight on John Griffith-Jones, the man destined to be the next chairman of KPMG in the UK. It’s an opportunity not only to look at him and KPMG but also to look at the broader changing of the guard in UK accounting.
And have a read, if you missed it, of Paul Myners’s very interesting piece in this weekend’s Sunday Telegraph. He discusses some of the issues facing boards confronted with cash bids, such as the pressure on directors and the changing behaviour of investors. His central contention, that less attention should be paid to short-term share price performance, is hackneyed and not very helpful. But he makes a number of other suggestions worthy of debate. The takeover timetable should be extended, he says. (Others in the City believe it should in fact be shortened). Boards and their advisers should report to investors more thoroughly on the alternatives to accepting a cash bid. Institutional investors should be more careful about lending stock, he adds. And regulators need to do more to force disclosure of stakes built up through contracts for difference.
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