US investor unveils 8.8 per cent stake in LSE

Mumbai: US investor Samuel Heyman and the entities he controls together has an 8.8 per cent stake in the London Stock Exchange (LSE), The interest was acquired through derivative instruments, Heyman Investment Associates said in a statement.

Heyman Investment Associates and Vesper Holdings LLC, both managed by Heyman, took interests on Monday in 2.66 million shares, paying as much as 1,290 pence a share, the statement said.

The news comes amidst the Nasdaq Stock Markets Inc''s 2.7-billion-pound ($5.1 billion) bid for Europe''s largest share market. LSE has rejected the offer as inadequate. The Heyman factor could further complicate matters for Nasdaq.

Nasdaq, which already owns a 28.75 per cent stake in LSE, has offered to pay 1,243 pence a share in cash for the rest of LSE. It is to be seen if Nasdaq takes so rosy a view of the LSE and raise its £2.7 billion ($5.1 billion) takeover bid to a level that the UK exchange might recommend.

Nasdaq has only limited financial headroom to increase its offer without also having to raise cash through issuing stock to its existing shareholders. The LSE has said that Nasdaq''s £12.43-a-share offer "substantially undervalues" the company and "fails to reflect its unique strategic position and the powerful earnings and operational momentum of the business."

This would suggest that the LSE is worth at least £12.43 a share on a standalone basis – and should command a premium on top. Considering takeover premiums of about 30 per cent, Nasdaq might have to offer between £16 and £17 a share to win over the LSE board.

Nasdaq needs to find £1.9 billion to pay for the 71 per cent of the LSE that it does not already own. Nasdaq''s existing net debt and the LSE debt that Nasdaq would assume would leave Nasdaq with $4.7 billion of debt upon completion of a transaction.