From BBC News:

Shares in the London Stock Exchange (LSE) have jumped by 30% on Monday following speculation of a bid war. On Friday the LSE rejected a 2.43bn ($4.2bn) bid from the New York-based exchange Nasdaq. This sparked speculation that the New York Stock Exchange (NYSE) and Euronext would table counter-bids. >> Full story.

From the Financial Times:

Corporate America is becoming disenchanted with the increasingly discredited practice of feeding company profit forecasts to investors. A consensus is forming among chief executives, regulators and analysts against the quarterly ritual that encourages management to pursue narrow, short-term targets at the expense of more sustainable growth. >> Full story.

There is a growing trend among publicly-listed companies in the US to exercise greater transparency (that word again) in a marketplace where some regulatory requirements that restrict how companies communicate with their financial audiences is lessening, partly due to the aftermath of scandals like Enron and Worldcom.

The FT mentions a study by McKinsey last week which concluded that it was a myth that regular earnings guidance led to lower volatility and higher share valuations – two reasons traditionally cited in favour of such disclosure, the FT said.

One connection between these two stories is the likelihood of pressure for change in the UK regulatory environment regarding communication on financial matters by listed companies if an American exchange succeeds in acquiring the London Stock Exchange.

That could help loosen up the restrictive and controlled way in which listed UK companies communicate with their financial audiences. A good thing, in other words.

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LSE shares fell while Euronext hit its highest ever.

According to a Reuters article,

“The LSE declined to comment on the Deutsche Boerse withdrawal, and a source familiar with the situation said the LSE board was meeting to discuss developments. “The meeting is ongoing,” the source said.

Sources familiar with the situation said Euronext, which had said it could make an offer for the LSE that would generate far more synergies than Deutsche Boerse’s, would wait for an LSE statement before making its next move known.”

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Euronext claims it would reduce fees for U.K. electronic stock trading by 10%.

“Euronext is the natural partner for LSE,” said Euronext CEO, Jean- Francois Theodore.

The company has not mentioned what price it will offer for the LSE, but would go after a dual primary listing for itself in London as well as in Paris.

“This is the opening salvo in what is going to be a pretty protracted battle,” Barclays Stockbrokers analyst Henk Potts said.

“Euronext believes its proposed structure would meet FSA requirements,” the company said in a statement.

The FSA did however warn that a foreign takeover could possibly result in regulation changes.

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The LSE claims that Deutsche Boerse’s bid “undervalues its business and its opportunities for growth”.

A Guardian Unlimited story says:

“Under pressure from his own shareholders and local politicians, Werner Seifert, chief executive of Deutsche Brse, admitted that if the deal were successful about 45% of the combined business would be run from London – most likely by his LSE counterpart Clara Furse. Ms Furse, he said, had been offered the role of running the combined share business of Frankfurt and London, but had not given him an answer other than a ‘fine smile’.

With another 30% of the operation run from Luxemborg, this suggests that Frankfurt would be a smaller centre. Mr Seifert said: ‘This is not about London v Frankfurt. This about first constructing and then running the equity market of choice in Europe’.”

Euronext is making a submission to the Office of Fair Trading regarding its bid plans.

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It have done so in an effort to win over shareholders. Deutsche Brse says that the deal would cut fees and create a “new generation” trading platform.

According to Finextra.com,

“The Brse says its offer, which is subject to on the sole pre-condition of an ‘unqualified and unconditional’ recommendation from the LSE board, would cut costs for market participants. Tariffs for electronic order book trading would be cut by 10% from January 2006, would remain those levels for five years and probably cut further in the future. The Brse also guaranteed that those fees would never exceed current levels.

The exchange would also offer an alternative to LCH.Clearnet at half the price, but also said it would honour agreements the LSE has with current clearing services providers. In information services, customers subscribing to a combined German and UK data package would receive a 10% discount.”

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Atticus, which possesses nearly 2% of Deutsche Brse, would rather have the company buy back its own shares rather than buy the London Stock Exchange.

“The acquisition appears to us to be motivated by empire-building. If they (Deutsche Brse) were purely motivated by shareholder interests, they would put the acquisition to a vote,” David Slager, who manages Atticus Capital’s European fund told Financial Times.

According to a Bloomberg.com article,

“Deutsche Boerse shareholders, including K Capital Partners LLC, in November urged the exchange to start a buyback program.

A previous plan to merge the U.K. and German exchange in 2000 collapsed after LSE shareholders opposed the sale.”

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