April 11 (Bloomberg) -- Nasdaq Stock Market Inc. bought a 15 percent stake in London Stock Exchange Plc for 447.5 million pounds ($781.5 million), less than two weeks after withdrawing its takeover offer for Europe's biggest equity market.

Nasdaq, the largest U.S. electronic equity market, purchased 38.1 million shares for 1,175 pence each, including a stake held by Threadneedle Asset Management Ltd., LSE's biggest shareholder, the New York-based company said today.

The acquisition may force LSE Chief Executive Officer Clara Furse to negotiate with Nasdaq CEO Robert Greifeld, who wants to create the first transatlantic stock market. The price Nasdaq paid was 24 percent more than its bid, which LSE rejected.

``The purchase is certainly no bargain,'' said Benn Steil, director of international economics at the Council on Foreign Relations in New York and an expert on exchanges. ``That would suggest, to the extent they have ambitions for a significant merger, they are concentrating on the London Stock Exchange.''

LSE shares closed at 1,038.5 pence, down from a peak of 1,219.5 in the days after Nasdaq made its initial bid. Shares of Nasdaq fell 1 percent to $40.85 after earlier rising as much as 9 percent.

John Wallace, an LSE spokesman, and Bethany Sherman, a spokeswoman for Nasdaq, declined to comment. Greenhill & Co. was Nasdaq's financial advisor on the bid.

Prospective Suitors

Furse, 48, rejected Nasdaq's March 9 offer of 950 pence, saying it undervalued the LSE. Greifeld, 48, dropped the bid on March 30.

The purchase values LSE at about 3 billion pounds ($5.26 billion), based on the price Nasdaq agreed to pay for its stake. That's equivalent to 25 times LSE's estimated earnings for the fiscal year ending March 2007 and is higher than any other European exchange, data compiled by Bloomberg show.

Ameriprise Financial Inc.'s Threadneedle held 35.4 million LSE shares. LSE's second-biggest shareholder, Barclays PLC, holds a 6.6 percent stake, Bloomberg data show.

Nasdaq's purchase makes it harder for prospective suitors such as NYSE Group Inc., the Nasdaq's biggest U.S. rival, to swoop in with competing offers. NYSE CEO John Thain, 50, has said he wants to be a leader in consolidating exchanges around the world. Christiaan Brakman, an NYSE spokesman, declined to comment today.

``Maybe they're covering their own position should someone else come in and make a bid,'' said Colin Morton, a fund manager at Leeds-based Rensburg Sheppards who helps manage $1.8 billion and doesn't own LSE shares.

Euronext

Other potential LSE partners include Euronext NV, operator of the Paris and Amsterdam stock exchanges, which has been in merger talks with LSE since December 2004. Euronext also held talks for a deal with Deutsche Boerse AG, Europe's biggest exchange by market value, only to say after Nasdaq scrapped its LSE bid that it's open to talks with ``a number of parties.'' Paris-based Euronext said it will make a decision by May 23.

LSE and Euronext have had talks about a zero-premium, all- stock ``merger of equals,'' London's Observer newspaper reported on April 9, without saying where it got the information.

Euronext spokesman Kevin Byram declined to comment.

The LSE-Nasdaq combination proposed by Nasdaq in March would have created a single market for stocks such as Microsoft Corp. and BP Plc. It would also have given foreign companies a way to tap American investors without having to meet U.S. regulatory requirements.

Seifert's View

The exchanges together list the stock of more than 6,000 companies, valued at $7.3 trillion. At Thain's New York Stock Exchange, a total of 2,700 listed companies have a market value of $13.9 trillion, data from the World Federation of Exchanges show.

Former Deutsche Boerse CEO Werner Seifert, who kick-started the LSE auction in December 2004 by offering 530 pence a share for LSE, said European stock markets would be hurt by a merger of LSE with a U.S. rival.

``Should a combination occur between London and New York, which by all standards are simply the two financial centers in world, then you basically could say goodbye to the vision of consolidating European capital markets,'' Seifert, 56, said in an April 9 interview. ``It's game over then.''

Seifert was forced to drop his LSE takeover bid in March 2005 and was ousted from the exchange in May.

Threadneedle, which said March 30 that it stood by a March 13 statement that the LSE has ``a strong future as a standalone business,'' will hold less than 1 percent of LSE after the Nasdaq transaction.

``We continue to believe that the LSE is the world's most successful cash equity trading platform operating in the world's most successful financial centre and are pleased to see this value recognized by the market,'' Michael Taylor, head of equities at Threadneedle, said in a statement.

To contact the reporter on this story: Edgar Ortega in New York at ebarrales@bloomberg.net.

Last Updated: April 11, 2006 17:00 EDT