Nasdaq's Greifeld Plans LSE Discussions

Updated from 1:29 p.m. EDT

Bob Greifeld, the Nasdaq's(NDAQ Quote) chief executive, plans to meet next week with officials of the London Stock Exchange, sources said.

The nature of the talks wasn't immediately clear. A Nasdaq spokeswoman declined to comment, citing a policy forbidding the disclosure of executive schedules. The planned meeting was reported earlier by the Daily Telegraph of London.

Over the last month, the Nasdaq has built a 25% stake in the London exchange through a series of block purchases from other shareholders. In March, the Nasdaq dropped a hostile effort to acquire the LSE outright for $4.2 billion.

Among the board members and executives with whom Greifeld hopes to meet is Clara Furse, the LSE chief executive who was a vocal opponent of the Nasdaq's hostile offer in March.

Greifeld, sources say, has spent the last several days meeting with shareholders of his own company. In those discussions, Greifeld indicated he has been exploring new ways of financing a possible bid for the LSE. To date, the exchange has spent $1.37 billion to acquire 57.8 million LSE shares.

Sources familiar with the shareholder discussions said Greifeld mentioned two objectives with regard to the LSE: engage in friendly conversations with management now, or launch a hostile takeover in the fall, after the six-month grace period required by British securities laws.

Nasdaq shares were recently up $1.60, or 5.2%, to $31.78. The move began after Richard Repetto, an analyst with Sandler O'Neill, reiterated a buy rating on the shares, saying they looked "cheap on a standalone basis" compared with other exchange stocks. Repetto lowered his price target to $44 from $50.

Prior to a recent 25% correction, Nasdaq shares had more than tripled in the past year to a high of $46.75 in late January. Prospects that the company might acquire the London Stock Exchange helped prop up the stock in March and April, as Nasdaq slowly built a 25.1% stake in the exchange.

Recently, however, Nasdaq's New York competitor, the NYSE Group(NYX Quote), unveiled a bid for the European securities exchange Euronext, and analysts began to question Nasdaq's ability to defend its overseas position.

Nasdaq's current ownership percentage in the LSE gives it a so-called blocking stake, where other companies could not successfully form a merger with the LSE. The company will also receive a hefty earnings return from the LSE, given that it owns more than 20% of the exchange. In his report, Repetto says that Nasdaq's position in the LSE is positive.

"With NYSE's bid to purchase the Euronext exchange, we believe Nasdaq's chances of acquiring the LSE, though by no means a certainty, have incrementally improved."