THE London Stock Exchange (LSE), which on Friday rejected a £2.4 billion takeover offer from Nasdaq, is expected to continue to resist a merger with the American technology market and hold out for a deal with its favoured partner, the New York Stock Exchange (NYSE).

Nasdaq has offered 950p a share for the LSE, a 64% premium to Macquarie’s 580p bid that shareholders rejected last month. The LSE dismissed 950p as “substantially undervaluing the company”.

The NYSE, Nasdaq’s biggest rival, is scrambling to mount its own bid in a move that looks set to spark a transatlantic bidding war. John Thain, chief executive of the NYSE, called an emergency meeting of his closest advisers on Friday, and is understood to have asked Citigroup to prepare an offer.

Sources close to the LSE said this weekend that Nasdaq’s interest would encourage it to open talks with the NYSE.

“The preferred route forward remains independence,” said the source. “But if that becomes impossible to defend, the NYSE is the right partner to do business with.”

Thain has publicly stated his desire to lead the consolidation of Europe’s stock exchanges.

The LSE, which has been fighting to retain its independence for 15 months, received a call from Nasdaq on Thursday. An LSE board meeting held via a conference call on Friday decided to reject the bid, which was announced shortly after the market closed.

A Nasdaq source said: “We believe our offer is a full and fair value. We are encouraged by the initial reaction of one of the LSE’s biggest shareholders and we will seek the opinions and approval of the other stakeholders.”

In a detailed statement, Nasdaq offered companies the first opportunity to dual-list in London and New York. It also recognised that shareholders would be disappointed if they did not receive the £510m share buy-back proposed by the LSE, and said it “would be willing to discuss ways of accommodating the capital return within a revised proposal”.

The exchange also promised continued regulation by the Financial Services Authority; adherence to UK corporate- governance conventions; and retention of existing clearing and settlement arrangements.

David Keir, fund manager at Scottish Widows, which owns 7.3% of the LSE, said: “We note that the value of bids is getting closer to our value of the business. We have consistently said over this long process that the LSE is a valuable organisation. The last set of results demonstrated this inherent value. We look forward to discussing this offer with Nasdaq and to continued dialogue with LSE.”

Another top-10 shareholder told The Sunday Times: “You’ve got to take your hat off to the LSE management. They have ridden the tough times and not been tempted to cave into any of the bids despite often intense pressure. Six months ago we thought the LSE was toppy at 600p, now it looks likely to go for over £10.”

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