By Crikey reporter Sophie Vorrath

The fat lady hasn’t sung yet but she is clearing her voice,
wrote Tom Stevenson in The Daily Telegraph yesterday. “By
5 o’clock this afternoon we will know
if McAussie is coming back with a sensible offer for the London Stock Exchange
or packing its bags for Sydney.”

Well, as it turns out it was the latter, the same paper later reporting
that Australian investment bank Macquarie’s £1.5billion, 580p a share
hostile bid was last night formally rejected by the Board of the London Stock
Exchange – who repeated the sentiment behind their rejection, last week, of Macquarie’s
proposal of the 580p a share offer: that it “fundamentally
undervalues the company given its unique franchise, attractive long term growth
prospects and pivotal position in global capital markets.”

The bid for the London Stock Exchange is not just another
approach, says Robert Cole in The Times. “It is special because the LSE is representative of the City of London.
The history is long, the brand is enormous and there is a sentimental
fascination that stretches far beyond the LSE’s meagre couple of billion pounds
of market value.”

“So why is this secretive outsider so determined to acquire
control of the Exchange?” asks the Tele. Sceptics argue that the LSE
is the “mother of all trophy assets” and thus perfect for the aggressive Australian
investment bank. Others say the as-yet-unrealised approach is simply an
exercise to raise the investment bank’s profile.

Executives close to Macquarie,
however, counter that an exchange is very similar to a conventional piece of
infrastructure, says the Tele. As one investment banker puts it: “You pay a large up-front fee
and it would be massively cash-generative … just like a toll road or airport.”

But Macquarie wouldn’t
make the synergy savings a trade buyer, like rival bidders Euronext or
Deutsche Börse, would if they bought the Exchange. Trading experts say
that it’s possible to run two exchanges from the same IT platform, with costs
only slightly higher than running one.

This might make customers/owners of the LSE wonder if Macquarie
would be overstretched paying 580p a share, says Cole. The more attractive the
offer becomes in cash terms, the greater the risk of undermining the LSE service.
It may be that Macquarie anticipated the short-shrift
response that 580p would get from the LSE but that a soft, low offer would
enable it to retire gracefully, with face saved.

Whatever the boys from down under had in mind last week when
they launched their “derisory” 580p offer, it was a splendid diversionary
tactic, says Stevenson. “While everyone agrees that anything less than 650p
doesn’t stand a cat in hell’s chance, no one knows how much deeper the Aussies’
pockets are than they’ve chosen to pretend.”

But should the LSE fall into Australians hands, it would
come as no surprise to anyone who spends much time in London these days, says
Matthew Engel in the Financial Times. “Virtually
every pint served in a London pub
is pulled from the barrel by an Aussie forearm. Just about every tooth is
pulled the same way (dentists apparently struggle to find work in Australia
– the teeth are too healthy).”

“Yes, I am a Pommie bastard who never washes (‘as dry as a
Pom’s towel’ is an ancient Australian insult),” says Engel. “And you are an uneducated
convict. Now, let’s have a drink. If you want to take over our stock exchange,
fine. As long as it is not the French or the Americans.”