Euronext on Wednesday outlined its prospective cash bid for the London Stock Exchange, hinting it could offer substantially more for the LSE's shares than the 530p on the table from its Frankfurt-based rival Deutsche Börse.
The pan-European exchange said it believed a link with the LSE would save roughly twice as much in costs and help it to earn nearly twice as much new revenue as an alliance between the UK and German exchanges.
Shares in the LSE jumped 7p to 572p in unusually heavy trading after having drifted down in recent weeks over signs that regulators and shareholders will try to prevent a deal.
Deutsche Börse, which has been criticised by some of its own shareholders for offering to pay too much, will now be under pressure to match, or exceed, Euronext's implied offer price.
Jean-François Théodore, Euronext chief executive, said the cost differentials were the result of “a beautiful business case”, adding: “The potential of an LSE/Euronext combination is, we believe, better than any other combination.” He went on to say that Euronext's auditors had confirmed its estimates of savings and new revenues. Analysts think these could allow it to offer a minimum 620p to 640p a share, with some estimates running to 690p. Euronext has declined to reveal its own offer price.
Mr Théodore declined to rule out a hostile bid, but said a recommendation from the LSE's board would be “helpful”.
Euronext also threw in several key inducements to shareholders and exchange customers. In particular, it promised to scrap its two-tier board of the type favoured among continental companies in favour of an Anglo-US style unitary board.
Like Deutsche Börse, Euronext said it will immediately slash its trading tariffs by 10 per cent and will cut the cost of information services by 10 per cent for customers taking combined feeds from both markets. It also committed itself to progressively lower tariffs in future years.
UK regulators have expressed concerns that the sale of the LSE to a non-UK company could mean the end of special protections for shareholders. To address that, Euronext is offering what it describes as a “dual primary listing” in London. While no such designation currently exists, Euronext said such a status would require it to maintain the protections available to shareholders under the Takeover Code, including the requirement that it seek permission from investors for large transactions.
It will irrevocably maintain its status as a Recognised Investment Exchange by the UK's Financial Services Authority.