Deutsche Boerse has made a £1.3 billion sterling approach for the London Stock Exchange (LSE), and the LSE's rejection of it today left observers doubting a much better offer would emerge.
The LSE, Europe's biggest equity market, held the door open to talks with Frankfurt, which is making its second attempt in four years to create a dominant European exchange by merging with London.
Analysts said a deal would face regulatory and end-user hurdles. Deutsche Boerse already has its own clearing and settlement houses and operates Eurex, the world's biggest derivatives exchange.
LSE shares jumped 22.5 per cent to a new record at 528-1/2p, just short of the 530p per share that Deutsche Boerse said it would offer.
The stock was extending a 25 per cent rally over the past six weeks on speculation of a bid from Frankfurt rival.
Deutsche Boerse shares sank 4.3 per cent to €42.63 as London held out for a better offer.
Deutsche Boerse confirmed its offer for the London exchange and accepted the invitation to talk with LSE to demonstrate the benefits of the plan. It said its proposal would materially reduce the cost of electronic share trading in Britain.
Analysts doubt whether a better offer would emerge. "We regard this as a full price. We would be surprised if a bidding war developed given the scale of the initial bid," Merrill Lynch analyst Mr Philip Middleton said.
Key issues will include regulatory concerns and the attitude of customers, who may well seek to obtain fee cuts from the merged entity, Mr Middleton said.