LSE Rebuffs Nasdaq

The U.S. exchange gets rejected a second time.
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Updated from 9:15 a.m.

The

Nasdaq Stock Market

I:IXIC

does not take "no'' for an answer.

Rejection or not, the Nasdaq says it still plans to press ahead with its $5.1 billion takeover bid for London Stock Exchange. This is the second time this year the LSE has rebuffed the Nasdaq's unsolicited overtures.

Just hours after the Nasdaq proposed buying the 71% of the LSE that it doesn't already own, the executives at the London bourse said the offer "substantially undervalued'' their operation and "fails to reflect its unique strategic position and the powerful earnings and operational momentum of the business."

The Nasdaq's latest bid had been widely anticipated and in a response the exchange said it is "disappointed" the LSE has rejected its latest offer.

"Nasdaq appreciates LSE's strong standalone growth prospects as shown in LSE's recent interim results," the exchange says in a statement. "Nasdaq believes that this potential is fully reflected," in its offer price.

The proposed deal comes eight months after the LSE rejected an earlier $4.2 billion unsolicited bid by the Nasdaq. But ever since it was rebuffed by the LSE, the Nasdaq has been positioning itself for another takeover attempt by buying up large blocks of the British exchange's stock.

By late spring, the Nasdaq had acquired a 25.1% so-called blocking stake in the LSE, which prevented the London market from accepting a deal from another bidder without first getting the Nasdaq's approval. In announcing its latest bid, the Nasdaq disclosed that it has upped its equity stake in the LSE to about 29%.

There's a lot of pressure on the Nasdaq to cinch a deal with the LSE now that its main U.S. rival, the

New York Stock Exchange

(NYX)

, is on the verge of completing a big merger with Euronext, a Paris-based exchange. Last month, the

Chicago Mercantile Exchange

(CME) - Get Report

announced it would buy its cross-town rival, the

Chicago Board of Trade

(BOT)

, in an $8 billion deal that would create the world's largest futures exchange.

Given that Nasdaq has invested so much capital to buy up LSE shares, market watchers were saying it was only a matter of time before it pounced again. It's not clear how the LSE's management will respond to the latest overture.

The LSE has been gaining market share on its U.S. competitors and its executives have indicated an unwillingness to be acquired.

Meanwhile, the Nasdaq is saying that its latest bid, which equals 2.7 billion pounds, is its final offer. Nasdaq's management is requesting a meeting with LSE Chairman Chris Gibson-Smith to discuss the proposal. Notably, the Nasdaq, in its press release, made no mention of LSE CEO Clara Furse, who has been a vocal opponent of doing a deal with the Nasdaq.

"We are excited about the prospect of combining two strong businesses to form the leading global, cross-border equity market platform giving issuers the ability to dual-list simultaneously in London and New York,'' says Nasdaq CEO Robert Greifeld. "The combined entity will be well positioned tolead further consolidation and compete effectively for the benefit of all market users."

Nasdaq's move comes just days after a big commodities exchange,

Nymex

(NMX)

, more than doubled in a red hot IPO that posted the best first day performance this year.