The green light given by shareholders in the London Stock Exchange for its €1.6 billion (£1.08 billion) purchase of Borsa Italiana means that an extra £350 million in cash will be returned to those same investors.

The money was raised as a loan to fund any cash element of the deal that would have to be paid to Borsa shareholders. Most of them, more than 99.9 per cent, have opted to take LSE shares for their holdings.

Thus the cash raised will not be needed and, under an earlier pledge, will form part of the continuing return of capital to LSE investors, meaning that in total another £500 million is due.

Clara Furse, the LSE chief executive, said she was confident that her new Italian investors were committed to the long term and would not be swift sellers. “When I saw a number of shareholders it was pretty clear to me that they have done very well out of their Borsa Italiana holdings over the past ten years, and some have seen quintupled profits.”

The vote at yesterday’s extraordinary meeting of the LSE was overwhelmingly in favour of the deal, with almost 100 per cent of the votes cast and 78 per cent of the issued share capital of the LSE onside.

The market also gave its vote of approval. LSE shares surged 47p to a record £14.40. They are now almost 200p above the level of the offer from Nasdaq, the New York market, that failed at the start of the year.

Ms Furse said that the result of the vote was “very satisfying . . . It’s a great story because it works at every level. It works at the financial level. It’s clearly a very attractive story for shareholders because it’s immediately earnings-enhancing.”

The deal brought with it various new products, a bonds trading platform and the most efficient clearing and settlement business in Europe. “It makes the exchange the partner of choice for a number of other parties.” Ms Furse refused to comment on the prospects of a deal with Nasdaq, which will be left with a diluted 22 per cent holding in the LSE after the share issue to fund the Borsa purchase.

Various big investors, including the Americans, had indicated beforehand that they would support the deal, although Nasdaq approval came only last week. The Wall Street market had opposed several resolutions at the LSE annual meeting on July 11 that were designed to facilitate the Borsa purchase.

Yet the mathematics of the poll suggest that even if Nasdaq had voted its current 30 per cent holding against the purchase, it would still have gone through. The deal will be completed in the autumn, after a prospectus is issued next month. The LSE has indicated that it will provide annual synergies of £20 million, while cost savings of another £20 million had been identified. The deal would add at least 10 per cent to earnings by the 2009 financial year.

Road to the Italian job

May 2000 LSE demutualises
May Merger talks begin between LSE and Deutsche Börse
Aug OM Gruppen makes £820m bid
Sept Deutsche Börse merger abandoned
Oct OM increases offer to £1bn
Oct 2001 LSE loses auction for Liffe
Nov LSE confirms talks with potential suitors, including Nasdaq
Dec 2004 Deutsche Börse suggests £1.35bn bid
Feb 2005 Euronext indicates interest in making a bid
March Deutsche Börse quits bid
Dec Macquarie Bank makes £1.5bn offer for LSE
Jan 2006 NYSE indicates interest
Feb Macquarie abandons bid
March Nasdaq tables 950p-a-share offer for LSE
April Nasdaq buys 14.99% stake
May Nasdaq raises stake to 25%
May Euronext pulls out of bidding
June NYSE enters $10bn merger with Euronext
Nov LSE rejects £2.9bn Nasdaq bid
Feb 2007 Nasdaq offer fails
June LSE bids for Borsa Italiana

*Source: The Times archives

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