March 31 (Bloomberg) -- Just by saying no, Clara Furse, chief executive officer of London Stock Exchange Plc, has made herself and investors 1.32 billion pounds ($2.3 billion) richer.

Furse has fended off four suitors who wanted to buy the LSE since 2004. Every time, Furse, who personally owns shares worth 1.9 million pounds, has argued her exchange, Europe's biggest by value of listed companies, was worth more.

It happened again yesterday, when Nasdaq pulled its 2.4 billion pound offer. So far, she's been right: at 2.67 billion pounds, LSE's market value is almost double the bid of Deutsche Borse AG in December 2004.

``She's played a smart, but dangerous game,'' said Alasdair Haynes, CEO of London-based ITG Europe, a trading service that competes with the LSE. ``In several weeks time, if nothing happens, then the stock will slowly drop and people will start thinking about how a bird in hand is worth two in the bush.''

Furse, 48, may have the last laugh after Nasdaq walked away from its offer, a record for any stock exchange. Investors now expect a new bidder to emerge, which may vindicate her decision to spurn offers. It would also help her deliver a handsome profit to shareholders of the 330-year-old exchange.

Possible bidders may include the New York Stock Exchange or Paris-based Euronext NV, according to Michael Long of Keefe, Bruyette & Woods in London. LSE may also seek a partnership with OMX AB, the biggest Scandinavian exchange company, he added.

``There is no pressure on Clara,'' said Stuart Fraser, a director at Brewin Dolphin, which manages $28 billion and owns LSE shares. ``Maybe she thinks the Nasdaq offer is not the final offer, and she's waiting for a higher bid.''

Exchange Pressure

Exchanges worldwide are seeking to merge to cut trading and technology costs, drive profit and boost the liquidity of their markets. They face pressure from their customers, largely banks and brokers, who are demanding easier and cheaper access to capital markets. Exchange shareholders want higher profits.

Nasdaq's decision to abandon the bid prompted a 6.8 percent decline in LSE shares yesterday to 1,043.5 pence, cutting their gain this year to 68 percent. That's still 9.8 percent higher than Nasdaq's offer of 950 pence a share.

Furse, who's related to the founder of Siemens AG, the Munich, Germany-based engineering company begun in 1847, has much at stake personally. Married with three children, she speaks five languages and came to the U.K. as a teenager to attend boarding school, later meeting her husband, Richard, at the London School of Economics. She owns 186,000 shares of the exchange she heads, according to the LSE, and has invested her own money as recently as last month, buying 36,000 shares at 811.5 pence each on Feb. 22.

That transaction signaled confidence, since it came just two days after Sydney-based Macquarie Bank Ltd. dropped its hostile takeover bid of 580 pence a share, which valued LSE at 1.5 billion pounds. Furse also holds 772,542 options.

Earnings Surge

``If she gets more than 950 pence for LSE at the end of this, she'll emerge smelling of roses,'' said Haynes. ``If not, she'll emerge with egg on her face.''

To keep investors sweet while she bides her time, Furse is returning 510 million pounds to shareholders, under a plan announced in February to help LSE fend off Macquarie's hostile bid. The company will buy back as much as 50 million pounds of stock a year and raise its dividend 71 percent to 12 pence a share in 2006.

Furse, who declined to be interviewed, has been able to be generous with investors because earnings have surged. First-half operating profit rose 24 percent to 50.8 million pounds, the exchange said in November.

The CEO, too, has benefited, earning a 55 percent pay increase, including a bonus that more than doubled, to 836,000 pounds for the year ending March 31, 2005, compared with 540,000 pounds a year earlier, according to LSE's annual report.

Failed Deals

LSE predicted an ``excellent outcome'' for fiscal full-year profit this week as trading and initial public offerings boomed, bolstering Furse's argument that the company is capable of competing on its own.

``LSE is holding out for independence,'' said Angela Knight, head of the London-based Association of Private Client Investment Managers and Stockbrokers, whose members hold as much as 15 percent of LSE. ``Fighting off bids to stay independent is one strategy --and it's a good one -- but fighting them off for the sake of fighting them off isn't.''

Furse hasn't been adverse to mergers. She has just failed to execute her own. In 2001, when she became the first woman to head the LSE, she was beaten back by Euronext in her attempt to buy Liffe, the U.K. derivatives market. She then tried to combine with Nasdaq in 2002. The deal crumbled as regulatory obstacles proved too difficult to surmount.

`Constant Bid Target'

In December 2004, Frankfurt-based Deutsche Boerse, Europe's biggest exchange by market value, bid 1.35 billion pounds, prompting Euronext to declare its interest too. The German exchange was forced to drop its offer in March 2005 by its own investors. Next in line was Macquarie, which jumped in with a hostile takeover attempt in December, only to drop it two months later.

``Having been a constant bid target, LSE may look to take a more proactive role in exchange consolidation now that fundamentals are stronger,'' Long of Keefe, Bruyette & Woods wrote in a note to clients yesterday.

LSE may seek to expand and diversify its sources of income by pursuing a deal with OMX, the Scandinavian exchange, which has a derivatives and technology business that would be attractive to the U.K. market, he added.

``She's trying to shape the future of the exchange,'' said Gavin Oldham, head of Hertforshire, England-based brokerage Share Centre Plc, which owns about 350,000 LSE shares and also trades on the market. ``We now have to wait to see where things go. I still think there will be a transatlantic deal as we should be looking to work across time zones.''

Furse, who was on vacation with her family in Morocco when Nasdaq bid, will be pressed to show her cards soon to maintain the confidence she has gained by turning away buyers.

``LSE has been playing hard to get,'' said Mamoun Tazi, analyst at Man Securities in London. ``And under her leadership it's done that very well.''

To contact the reporter on this story: Nandini Sukumar in London at nsukumar@bloomberg.net

Last Updated: March 31, 2006 00:06 EST