Analysis By Guy Robarts BBC News business reporter

Deutsche Boerse shareholders vehemently opposed the LSE bid

The LSE, jilted at the altar, must now play another waiting game to see if rival Euronext takes advantage of a clear run and tables its own bid.

"The question is whether Euronext will continue with its bid or retreat as well," says analyst Johannes Thormann at WestLB.

Deutsche Boerse's chief executive Werner Seifert is licking his wounds after his ambitious plan proved too much for his nervous shareholders, forcing the exchange to flee from the bidding arena.

Shareholders said his bid of 530 pence was far too high, while the LSE felt it was worth much more, fancying itself to be worth more like 600 pence a share.

The LSE now has to calculate its chances of ever being taken over at a higher price Thomas Nagtegaal, analyst

In the end it was a victory for rebels, led by two US hedge fund managers who had called for the resignation of the man who transformed Deutsche Boerse from a regional exchange into the world's biggest listed bourse group.

"Shareholders of Deutsche Boerse and Euronext have shown this weekend that they are clearly opposed to paying the price that LSE shareholders want," says analyst Thomas Nagtegaal at Netherlands-based Rabo Securities.

Now, Werner Seifert has been forced to build bridges and plans to keep his investors sweet by using the war chest to launch a share buy-back scheme instead.

According to Hilary Cook, from Barclays Stockbrokers, Deutsche Boerse could have quit the bid for another reason other than shareholder pressure.

"One of the reasons Deutsche Boerse didn't pursue this, is that it kind of knew that Euronext could outbid them," says Hilary Cook.

"The fit between the LSE and Euronext is better than it would be between the LSE and Deutsche Boerse. There's more common trading platforms."

Waiting game

In London, the pressure is rising on LSE chief Clara Furse who is facing scrutiny from shareholders worried by the fall in the LSE's share price.

THE PURSUIT OF THE LSE 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 March 2005: Deutsche Boerse ditches LSE bid LSE's share price Deutsche Boerse's share price

After refusing to recommend the Deutsche Boerse offer when it was informally tabled in December, she opened talks with the German exchange and rival Euronext in the hope of firing off a bidding war.

But weeks of uncertainty have dogged the LSE's share price - shares have dropped from above 580 pence shortly after the Deutsche Boerse bid in December and are now trading way below the 530 pence offered by the German exchange.

"The LSE now has to calculate its chances of ever being taken over at a higher price," says Thomas Nagtegaal.

All eyes are now on Euronext, which has already said it wants to submit an offer for the LSE but has yet to indicate what price it might pay.

"Euronext has played its cards right. The main thing in its favour is the fact that there is no bidding war on the horizon," adds Richard Hunter at stockbroker Hargreaves Lansdown.

One thing has been apparent in the last few weeks - that the ambitions of the LSE's suitors to be Europe's biggest stock exchange seem to clash with the interests of shareholders keen to get the highest rate of return in the most secure environment.

Clash

Deutsche Boerse shareholders vehemently opposed the LSE bid

The very nature of the stock exchanges as a symbol for power and capitalism means their smooth running is essential to maintain investor confidence.

Uncertainty over the future cost of transactions, among other things, has stoked opposition from shareholders.

A merger between the two stock exchanges would have meant a new trading system and with it potential technical hitches and delays.

A merger with Euronext would be logistically simpler because the two already use common trading platforms and Euronext has an established presence in London through owning Liffe.

Euronext was formed through the merger of the Amsterdam, Brussels and Paris stock exchanges

Last month, City watchdog the FSA warned of "significant" implications for the LSE if a future owner moved it to another country, raising fears that it might no longer be subject to UK takeover and corporate governance laws.

However, LSE shareholders are not opposed to a merger, knowing that a pan-European deal would create the biggest stock market operator in Europe and the second biggest in the world after the New York Stock Exchange.

Powerhouse

The London exchange has had to weather harsh criticism since Clara Furse took over the helm.

London is the jewel in the crown Hilary Cook, Barclays Stockbrokers

Spikes in its share price have been mainly confined to times of takeover speculation and the LSE has also struggled to attract new companies to list: the only big names that made it onto the market last year were Premier Foods and bookmaker William Hill.

But some commentators have praised Clara Furse's achievements in turning the exchange, floated in 2000, from a club of gentlemanly brokers into a commercial powerhouse. She is the first woman to lead the LSE in its 300-year history.

Now, no longer the belle of the ball, Clara Furse needs to clinch a deal with Euronext. But if Euronext decides to abandon the LSE too, it will be left with no suitors and little clear direction.

Hopes linger of a reconciliation between Deutsche Boerse and the LSE as the German exchange reserves the right to bid again after six months.

Should Euronext, led by Jean Francois Theodore, seize the day and put its money where its mouth is, Deutsche Boerse may return to the fray and Clara Furse may be granted the bidding war she wanted after all.

But according to Bridgewell Securities analyst Geoff Miller, regulatory uncertainty could delay the timing of a Euronext bid.

"We think it unlikely that Euronext will formalise any offer until after the Office of Fair Trading has decided whether or not to refer the case to the Competition Commission at the end of March," says Geoff Miller.

There has even been speculation that Euronext and Deutsche Boerse could merge with each other, leaving the LSE isolated.

Despite these fears, however, the LSE remains in a strong position.

"London is the jewel in the crown", says Hilary Cook. "But London must make sure it doesn't get left out in the pan-European merger of stock exchanges.