The London Stock Exchange has dismissed OM Gruppen's hostile takeover bid as 'wholly inadequate' in its formal response to the £900 million offer for its business from the Swedish technology group.
In a letter to shareholders, Don Cruickshank, chairman of the London Stock Exchange, says: "We believe that OM's offer is an attempt to buy your company on the cheap, predominantly using new OM shares, which are of uncertain value. Under OM's offer terms, London Stock Exchange shareholders, in aggregate, would own just 18.5% of OM's enlarged fully diluted share capital, representing a terminal loss of influence for LSE shareholders."
Desrcibing the OM bid as "derisory", the LSE defence document asks "how sustainable is OM's current share price?", pointing out that the Swedish group's shares are currently trading at 85 times historical earnings and at a share price of over four times the level of one year ago. Three quarters of OM's £900 million offer is paper-based.
The OM share price "currently appears to include a significant element of 'hope value' in Jiway - an untested business proposition only scheduled to start operations in November 2000," states the LSE.
Shareholders switching to the OM Technology trading platform would further face unknown migration costs for no clear cost or functional advantage, states the LSE. The London exchange also claims that the OM platform lacks scale in equity trading and has a history of delayed roll-outs and a poor record of system availability