LSE's hopes of fending off rivals boosted by 14% growth

The London Stock Exchange has boosted its chances of avoiding the clutches of predatory rival Nasdaq OMX by reporting 14 per cent growth as a standalone business.

The UK exchange - which has been a takeover target since its 1.8 billion bid for a Canadian rival collapsed last month - yesterday said revenue for its financial first quarter to the end of June rose to 190.2 million from 167.3m a year earlier.

Shares in the LSE have been trading around a 12-month high on speculation that the group could become a takeover target for larger rivals, such as US peer Nasdaq OMX or the Singapore Exchange.

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The British exchange has been in the spotlight since the end of June, when it dropped its own merger plan with Canada's TMX Group. The LSE announced a friendly tie-up with TMX in February, but a Canadian consortium named Maple opposed the plan in May, arguing that the Canadian exchange should not fall into foreign hands.

On 29 June, the UK group pulled its bid for TMX, saying the offer was "highly unlikely to achieve the required two-thirds majority approval" at the Canadian exchange's shareholder meeting.

Reacting to yesterday's figures, Daniel Garrod, an analyst at Barclays Capital, said: "The LSE has multiple Plan Bs - not just merger and acquisitions, as speculated with Nasdaq, but including other possible partners both listed and unlisted.

"The LSE is delivering on its organic diversification strategy," he added.

The exchange's shares have risen by about 17 per cent since the end of June as traders have gambled that the group would itself become a takeover target. JP Morgan analyst Rae Maile noted: "There are various influences on the share price in the short term, including the ongoing questions regarding industry consolidation.

"The fact that earnings estimates remain on an upward trend is likely to be supportive of the share price in the short term."

The Q1 figures also revealed that revenues in the LSE's main markets unit were up 4 per cent to 79.7m, as bond trading rose on the European sovereign debt crisis and more initial public offerings (IPOs) balanced sluggish trading in shares and futures.

Yesterday's trading update coincided with the exchange's annual shareholder meeting, at which chairman Chris Gibson-Smith told investors: "We have seen strong financial results, but - more deeply - we have seen the group emerge as a more diversified company.

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"We remain confident that our strategy is the right one, and I am pleased to be able to present to you a company strongly positioned to meet both the considerable economic challenges facing markets and the opportunities to come."