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Mon 1 Oct 2007 04:31 PM

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Gulf states' chances of LSE takeover hampered

Dubai, Qatar see stakes in London exchange drop after completion of Borsa Italiana merger.

Dubai and Qatar on Monday saw a sharp fall in their respective shares in the London Stock Exchange (LSE) following the completion of its $2.3 billion merger with Borsa Italiana.

The listing of an additional 79,449,753 shares in the London bourse - giving it a market value of $9.4 billion – has diluted the recently-acquired stakes of both state-owned Borse Dubai and Qatar Investment Authority (QIA), an LSE spokesperson said.

"The 28% stake held by Borse Dubai has been diluted down to around 20%, and QIA's 20% position has been reduced to 14%," the spokesperson said.

The merger means the owners of Borsa Italiana, a consortium of Italian banks, now own 28% of the combined business.

The new issuance and addition of a new major shareholder hamper the ability of either Gulf Arab state to takeover LSE.

QIA’s acquisition last month of a 20% stake and Borse Dubai’s purchase of a 28% share in a deal with US exchange owner Nasdaq sparked speculation of a bidding war for ownership of the London bourse.

Both investors have stated that their interest in LSE is solely a "strategic" investment, but QIA has said it may make a play for LSE if someone else moved for exchange.

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