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London - Middle East investors Borse Dubai and the Qatar
Investment Authority hold the key to the future of the London Stock Exchange,
amid speculation that it has become a takeover target after its aborted $3.5bn bid
for Canada’s TMX Group.
Borse Dubai owns nearly 21% of LSE stock and the Qataris
hold 15.1%, Thomson Reuters data shows, making the investors easily the largest
shareholders in the London exchange and key decision-makers in its future.
“They (the Middle East investors) might be like us and think
this is a very good turnaround ... and the shares have still got upside on the
fundamentals,” said one of LSE’s largest European shareholders, speaking on
condition of anonymity.
“But if they get impatient - it’s the Dubai stake that is
the critical one - if they were to get impatient they could easily put the
company into play. With two big shareholders, it’s a done deal if they want it
to happen,” the investor said.
The British exchange blamed its failure to attract the requisite support from TMX shareholders for the decision to cancel its merger with the Canadian exchange at the eleventh hour on Wednesday.
The withdrawal fuelled speculation that the LSE may now present
an attractive takeover target to rivals, such as US group Nasdaq OMX.
It has also thrown the spotlight on LSE CEO
Xavier Rolet, who was making his first major foray into the mergers and
acquisitions market with the TMX bid.
LSE shareholders were quick to back the LSE boss on
Thursday, though future support will depend on how he steers the exchange
through a widely expected wave of further consolidation.
“I’d be amazed if anyone is calling for Rolet to step down.
He’s doing a good enough job running the business and I don’t think he’s under
serious threat in the short term,” the head of trading at a large European
investment bank said.
LSE shares have traded up 15% in the past weeks as investors
piled in, hoping a bid would materialise if the British failed to secure the TMX
merger. The shares were up 5.2% in morning trade.
Nasdaq OMX has been waiting in the wings since it pulled its
bid for NYSE Euronext in May, having gone hostile for its main rival the
previous month in a challenge to NYSE’s friendly merger agreement with Deutsche
Boerse.
The US-based exchange group tried and failed to buy the LSE twice in 2006 and 2007, latterly bidding £12.43 a share in an offer that was rebuffed initially by LSE management and finally by shareholders.
