City Fears Macbank, Seeks Big Premium

Sydney Morning Herald

Wednesday November 23, 2005

James Moore

The London Stock Exchange will demand a price substantially in excess of 800p a share if Macquarie Bank wants to buy it, as concerns grow in the City about the consequences of a takeover by the Australian investment bank.

At 800p a share the LSE would cost #2 billion ($4.67 billion). Analyst reports have put a fair value on the exchange's shares of up to 660p.

It is thought the LSE's management, which is determined to remain independent, has taken note of the reports and is now likely to tell Macquarie that it would require a substantial premium - as much as 30 per cent - to compensate shareholders for a change in control.

It also wants a premium - LSE shares closed 1p higher at 602p on Monday night - to ensure that any bid reflects the exchange's growth prospects.

Concerns are growing about Macquarie's intentions. Some brokers are worried about its previous deals, where customers of companies bought by the Australian investment bank have faced sharp increases in fees.

Last year the LSE was forced to cut fees charged to the companies listed on its markets in a deal with the Office of Fair Trading, which also limited the increases the LSE can impose. The undertaking will be reviewed but not until April 2007.

Users of the LSE fear that they will be forced to bear the financial cost of the premium Macquarie will have to pay. Smaller stockbrokers are particularly concerned.

LSE spokesman John Wallace said the company had cut fees to brokers in recent years. He pointed to cuts in trade reporting fees and volume discounts, designed to reward those who put large amounts of business through the exchange.

Would this continue under Macquarie? In its previous deals the bank has paid high sums for companies with dominant market positions and pricing power.

Angela Knight, chief executive of the Association of Private Client Investment Managers and Stockbrokers, said smaller stockbrokers would be demanding reassurances, should Macquarie win control.

"There has to be some copper-bottomed agreements on governance, industry involvement, competitive involvement and pricing."

Telegraph, London