No bid in sight as LSE shares plunge

By Daisy Ku

LONDON (Reuters) - Shares in London Stock Exchange (LSE.L) hit their lowest level for more than two years this week as competitive pressures on the stock grow stronger and the prospects of a takeover dim.

The arrival of new entrants to the exchanges sector means a tough future not only for the LSE itself, but also for those who were considering a buyout only months ago.

In the coming three months, Turquoise, a trading venture backed by nine big investment banks, and Nasdaq OMX Group's (NDAQ.O) pan-European market will be up and running and will be vying with the British exchange for equities trading fees.

"Competition is coming in," said Fox-Pitt Kelton analyst Andrew Mitchell. "There is much greater uncertainty on valuations, inhibiting M&A."

Only nine months ago LSE shareholders were enjoying a Middle Eastern bidding war for the exchange's shares.

But since January, LSE shares have plummeted almost 58 percent from their all-time high of more than 2000 pence, underperforming a 11.2 percent drop by the FTSE 100 .FTSE over the same period.

The shares hit 842.5 pence on Thursday, their lowest level since March 2006, putting them on a price/earnings ratio of 11.4 times 2009 forecast earnings -- below the trough multiple seen in 2003.

Investors fear they could yet fall further, as investment banks continue to deleverage and as existing shareholders sell their positions in order to offset the pinches of the credit crunch.