The board of the London Stock Exchange announced that it has received a preliminary takeover proposal from the Nasdaq Stock Market Inc. worth £2.4 billion-pound, or US$4.2 billion.

The LSE’s board says that the pre-conditional proposal was made with a view to NASDAQ making an offer to acquire the company for 950 pence per share in cash. Again, the LSE is rebuffing the offer.

The board says that it, “firmly believes that the proposal, which represents only a 8% premium to the current market price, substantially undervalues the company, its unique position and the very significant synergies that would be achievable from the combination of London Stock Exchange with any major exchange group.”

“During its defence against the recent offer from Macquarie, the company demonstrated that it has extremely strong growth prospects, which have been reinforced by record levels of trading on SETS in the first two months of the calendar year,” it points out. “February accounted for nine of the 20 busiest trading days ever on SETS with the average daily value traded up 43% to £5.8 billion and the average daily number of trades up 35% to 266,577.”

Accordingly, the LSE board has rejected this unsolicited approach and intends to continue with its proposed 200 pence per share capital return, which is subject to approval by shareholders at a meeting to be held on April 19.

Despite the LSE’s rejection, Nasdaq says it is still interested in acquiring the exchange.

It issued a statement saying that it, “believes that its proposal would represent an attractive offer for shareholders, listed companies and the trading community and reflects unique benefits for LSE which have not to date been proffered by other parties.”

The exchange argues that the cash offer of 950 pence per ordinary share represents a 72% premium over the closing price of 552 pence on Aug. 12, 2005, the business day immediately prior to Macquarie’s announcement of its potential interest in a possible formal approach to LSE; a 64% premium to the cash offer share price of 580 pence per share offered by Macquarie; and, a multiple of 29.8x adjusted earnings for the 12 months to December 31.

“Whilst this price has been based on the assumption that the LSE capital return announced on March 7 is not consummated, Nasdaq is conscious that the capital return is attractive to LSE shareholders and would be willing to discuss ways of accommodating the capital return within a revised proposal,” it adds.

Nasdaq also says it “believes that bringing together the two organisations would present listed companies, traders and investors with an equity market place, based on dynamic industry leadership, to serve their needs unmatched by any other market place in the world.”

It says that a transaction presents the potential to create: the only global, cross-border equity market platform giving issuers the ability to dual-list simultaneously in London and New York; the leading global exchange for listing companies of all sizes and the natural choice for international issuers; a powerful equity market place by number of listings with over 6,266 listed companies with a total market capitalisation of approximately £4.2 trillion ; and, significant efficiencies.

Nasdaq is also committed to preserving an FSA regulated Main Market and AIM. Existing clearing and settlement arrangements will remain in place. It also contemplates that the LSE would have its own board of directors with a majority of non-executive independent directors, and significant representation on the top company board, which would meet regularly in London.

“Nasdaq believes that this proposal represents an attractive offer for shareholders and users. Nasdaq will be seeking constructive discussions with the board of LSE with the view to reaching a recommended offer for shareholders,” it concludes.