The LSE has rejected previous informal offers

The LSE said it was keen to keep the door open for further offers and would still hold talks with Deutsche Boerse and potential bidder Euronext.

Earlier, the German exchange operator outlined its 530p-a-share cash offer.

Under the proposal, it vowed to cut user costs and pledged to retain the LSE's structure and regulation.

The LSE - Europe's largest share market - said the proposed offer did not recognise the "inherent value" in its business.

Talks to continue

The LSE added that while it remained confident of growth if it remains independent: "The Board believes that a combination, on the right terms, of the London Stock Exchange with another major stock exchange could be in the best interests of shareholders and customers."

LSE shareholders will be ... hoping some sort of bidding battle will break out between Euronext and the Deutsche Boerse Henk Potts, Barclays Stockbrokers LSE's share price Deutsche Boerse's share price

The group said it was "willing to continue to hold discussions with Deutsche Boerse and Euronext about a significantly improved offer".

Euronext declined to comment on Thursday but many commentators still expect it to enter the fray.

"The LSE shareholders will be looking to see how much they can squeeze out of this deal and hoping some sort of bidding battle will break out between Euronext and the Deutsche Boerse," Henk Potts of Barclays Stockbrokers - a shareholder in the LSE - added.

The LSE is also likely to hold out for a higher bid, much closer to the �6-a -share level, Mr Potts said.

Concerns soothed

A takeover would create a leader in the securities services industry and increase efficiencies, Deutsche Boerse chief executive Werner Seifert said.

As part of the deal, the group pledged to cut the cost of electronic order book trading by 10% from January 2006.

Earlier, Deutsche Boerse tried to soothe investor concerns about its Clearstream unit, the clearing house that processes securities transactions.

Fears exist that a merger may create a monopoly situation and lead to higher fees.

The German exchange said it would enter into a long-term arrangement with the LSE's settlement company CrestCo.

THE STORY SO FAR May 2001: LSE and Deutsche Boerse announce plans for pan-European bourse called iX August 2001: Sweden's OM bids for LSE, forcing it to withdraw from iX deal September 2001: LSE bids for derivatives exchange LIFFE, which is eventually bought by Euronext December 2004: Deutsche Boerse bid for LSE rejected, but door left open for more talks December 2004: Euronext says it is also interested in bidding for LSE January 2005: Deutsche Boerse sets out its bid

Deutsche Boerse also moved to calm mounting concerns among its own shareholders and German authorities.

Deutsche Boerse shareholder Standard Life Investment had initially criticised the deal but said on Thursday that it was pleased that more information was available and it would meet with the company soon.

Deutsche Boerse vowed it would "continue to be incorporated in Germany with its global headquarters in Frankfurt".

Meanwhile, listing, trading and regulation in the Frankfurt market "will be entirely unaffected by the proposed transaction", it said.