Computershare out of the race

By Lisa Murray
October 8, 2005

Computershare has been forced out of a Macquarie Bank-led consortium that is planning a multi-billion dollar bid for the London Stock Exchange because regulators in Britain are concerned about its involvement.

The decision was made early on Friday morning after 11th-hour talks between Macquarie and Computershare collapsed. The talks were triggered by a report in London's Daily Telegraph revealing that the Melbourne-based share registrar was part of the Macquarie consortium - which was understood to comprise up to 15 investors, including hedge funds.

Computershare did not comment on the talks but released a statement to the stock exchange on Friday confirming it was no longer involved.

"Computershare wishes to confirm that it has no intention of investing in, or acting in concert with, any consortium or any other offeror for London Stock Exchange," it said.

Its shares dropped 9c to close at $6.49 on Friday.

Macquarie Bank, which is expected to announce its bid in the next few weeks, has to decide whether to increase its own stake in the consortium or find another investor. London's Daily Telegraph reported on Friday that the LSE was becoming increasingly opposed to a bid and that any offer would have to be higher than £7 a share, valuing the exchange at more than $4 billion. Shares in Macquarie fell 10c on Friday to $68.90, finishing the week 9 per cent lower. However, the stock is still up almost 50 per cent so far this year.

The acquisition of a stock exchange would propel Macquarie into new territory as it has typically focused on property and basic infrastructure such as roads, airports, broadcast towers and water companies. It was unclear whether the bank would take the asset on to its own balance sheet, or roll it into a new fund or act as a co-investor alongside one or more of its infrastructure funds.

While a source close to the deal confirmed that Computershare's withdrawal was prompted by discussions with British regulators, they would not reveal why its involvement was seen as a problem.

Analysts said it could be because Computershare was one of only three players in the British share registry market. The Competition Commission in Britain has repeatedly expressed its concerns about combining a stock exchange with companies that offer clearing, settlement or registry services.

The commission is also considering potential bids from Euronext - operator of exchanges in Belgium, France, the Netherlands, Portugal and London's derivatives exchange - and Germany's Deutsche Boerse.

Both Euronext and Deutsche Boerse face competition hurdles. There have also been reports the two are considering their own merger.
