Stock exchange shares to plunge

London Stock Exchange shares are set to plunge today after rival Deutsche Borse walked away from a potential £1.35 billion takeover bid.

This clears the way for a bid from Paris-based Euronext, but there will no longer be an auction for it and there is no guarantee the French organisation will bid.

The German stock exchange had faced increasing hostility from its shareholders for a bid which it had indicated would be worth at least 530p a share. They wanted it to hand cash back to its own shareholders.

Cantor Index, the City spread betting firm, said LSE shares would fall 49p to 490p on the news. Investors are now worried that they may eventually end up with no bid for the LSE. Its chief executive Clara Furse would then be left with few options and little clear direction over the future of the London market.

Both the French and German exchanges have faced increasing concern at home that if they won a bid for the LSE much of their business could shift to London damaging either Frankfurt of Paris's long term future as financial centres. But eventually City insiders believe that Europe will end up with at best two major share markets rather than the three it currently supports. A combination of any of the two of the LSE, Deutsche Borse or Euronext would create the world's second largest share market after the New York Stock Exchange.

The Germans announced their withdrawal late last night. Deutsche Borse chief executive Werner Seifert said: "The London Stock Exchange does not find itself in a position to recommend a transaction at a price we find supportable."

He left the door open to reenter the bidding war if Euronext or anyone else made a takeover bid. But dealers said that this would not be popular with his own shareholders nor did it appear that he could restart friendly talks with Mrs Furse.

The bid battle for the LSE began in December when Deutsche B?rse launched its indicative bid of 530p a share. Shares in the LSE soared to 590p at the turn of the year but had already slipped back to 539p by last Friday.

Dealers said that Euronext might now get away with a bid of no more than 580p a share. It could launch its formal offer as early as this week.