LONDON The London Stock Exchange (LSE.L) became a takeover target for Nasdaq OMX (NDAQ.O) overnight on Wednesday when the British exchange pulled its $3.5 billion merger with Canada's TMX Group (X.TO), analysts said.
Exchange analysts said on Wednesday the British exchange was up for grabs following its decision to pull back from the TMX deal less than 24 hours before shareholders voted on the controversial plan.
The LSE said in a statement late on Wednesday it had not secured enough support from TMX investors in early proxy voting, and the merger would not proceed.
"Investors have bought into LSE stock recently in the belief the TMX bid will fail and the LSE will end up on the block," said Simon Maughan, an analyst at broker MF Global.
"I suspect there are more LSE shareholders willing to sell now," he said.
Arnaud Giblat, a director at UBS, said there was an obvious candidate waiting in the wings for the London exchange: "Nasdaq made bids for TMX and NYSE, and it is reportedly looking at LCH. Nasdaq seems to want to bulk up and the LSE fits the bill."
Nasdaq shares were trading up 3.3 percent after the LSE announcement on Wednesday at $24.80 a share.
Nasdaq OMX twice tried and failed to buy the LSE in 2006-07, and the U.S. group has been watching and waiting since it pulled in May its bid to buy NYSE Euronext NYX.N -- a challenge to NYSE's deal with Deutsche Boerse (DB1Gn.DE).
Nasdaq OMX said two weeks ago it made a bid to buy a minority stake in LCH.Clearnet, Europe's largest clearing house, in a move to strengthen its foothold in the region.
"Given the LSE has been telling shareholders it needs a transatlantic deal, they may find it hard to defend their position if Nasdaq offers a premium," Giblat said.
Maughan said that, "Nasdaq is the prime candidate. There is bad blood between the exchanges, and the Nasdaq management are aggressive. I don't think you have to look far beyond Nasdaq as a bidder for the LSE."
TMX shareholders were to choose on Thursday between the LSE's bid and a rival offer from the Maple Group, which has offered $3.7 billion to persuade TMX investors to keep the exchange in Canadian hands.
The LSE withdrawal leaves Maple free to forge ahead with its TMX acquisition plan uncontested, but the Maple bid, which is backed by 13 Canadian financial firms, will likely face anti-trust scrutiny from Canadian regulators.
(Reporting by Luke Jeffs; Editing by Will Waterman and Robert MacMillan)