The London Stock Exchange has rejected a new £1.35 billion cash bid from Deutsche Börse but has agreed to hold talks with the German exchange that could lead to an improved deal.
In a statement, the LSE says Deutsche Börse's 530 pence a share cash offer "undervalued" its business and the "substantial synergies" of such a deal. The cash offer of 530 pence per share is 23% higher than LSE's closing share price on Friday of 430 pence.
LSE shares soared 21% to 522.75 pence in morning trading on the news. The stock has risen 25% in recent weeks on speculation of a takeover bid from its Frankfurt-based rival. In contrast Deutsche Boerse shares were down two per cent this morning to 43.63 euros.
Although it has shunned the Deutsche Börse cash offer, the LSE says it has agreed to hold discussions with the German exchange to see whether a "significantly improved" proposal could be agreed.
The Börse attempted to take over the LSE four years ago but the deal was scuppered by London shareholders - at the time LSE was owned by its members - and on a hostile bid from Scandinavian stock exchange operator OM Group.
Deutsche Boerse says it has accepted the LSE's invitation to demonstrate the benefits of its proposals and believes a deal can still be done. The German exchange says it would materially reduce tariffs for electronic order book trading in the UK but still honour existing agreements between the LSE and clearing and settlement providers in the UK.