The Nasdaq has had two approaches rejected by the LSE

In November LSE also turned down calls for a meeting with Nasdaq, which has raised its stake in LSE to 28.75%.

The Nasdaq is now posting out its offer document to LSE shareholders, setting a price of �12.43 a share.

The LSE has previously said Nasdaq is undervaluing the firm, and is urging shareholders to reject the approach.

"The board unanimously rejects Nasdaq's offer," the LSE said, "as it substantially undervalues the exchange and fails to reflect its unique strategic position and the powerful earnings and operational momentum of the business.

"The board will be writing to shareholders to explain its reasons for rejecting Nasdaq's offer.

"In the meantime, shareholders are strongly recommended to take no action in respect of Nasdaq's offer."

January deadline

Nasdaq says it has borrowed $5.1bn to fund a takeover.

Part of that new loan, the exchange said in a statement, would be used to repay all of its most significant current debt, while the firm said it would also issue new stock worth $775m.

LSE BID TIMELINE December 2004 - Deutsche Boerse tables �1.35bn offer December 2004 - Euronext makes merger approach March 2005 - Deutsche Boerse drops takeover plans December 2005 - Macquarie tables �1.5bn bid February 2006 - Macquarie ditches offer March 2006 - Nasdaq tables �2.4bn bid March 2006 - Nasdaq withdraws bid, Deutsche Boerse drops plans for LSE offer April 2006 - LSE denies reports of an approach from New York Stock Exchange May 2006 - Nasdaq raises LSE stake to 25.1% September 2006 - Brokerage Icap calls off merger talks November 2006 - Nasdaq tables "final offer" of �2.7bn, ups stake to 28.75% December 2006 - Nasdaq launches hostile takeover bid for LSE Q&A: LSE takeover See LSE shares

The final date for shareholder acceptance of the Nasdaq offer by LSE shareholders is 11 January 2007.

Shares in the London stock market company have more than doubled over the past year amid ongoing speculation it would be subject to a takeover offer.

In March, Nasdaq dropped a proposed �2.43bn ($4.2bn) bid for the exchange after the LSE rejected its advance.

The US firm is the latest in a long line of foreign suitors to approach the London market.

German market Deutsche Boerse, Australian investment bank Macquarie and the pan-European exchange Euronext have all abandoned offers for LSE since December 2004.

The LSE has resisted approaches saying it can continue to grow alone, while the UK government has said it is neutral as to the nationality of LSE's owner.

'Financial stretch'

But analysts say stock exchanges will need to merge if they want to keep on growing and offer a wide-range of global financial services.

Richard Hunter, head of UK Equities at Hargreaves Lansdown Stockbrokers, said it was inevitable there would be a global consolidation of stock exchanges.

"Whether this offer forms part of that consolidation still seems unclear," he said.

"The weakness of the dollar since the approach was announced, the fact that the LSE share price remains resolute at around 80p higher than the bid on the table, and even the recent weakness in Nasdaq's own share price all seem to be conspiring against it.

"LSE remains convinced that the offer undervalues the company and, for Nasdaq's part, even an offer at this level seems a financial stretch. This does not look likely to be the final chapter yet."