Australia-based Macquarie Bank yesterday conceded defeat in its six-month battle to buy the London Stock Exchange (LSE), saying it had concluded that no price it was prepared to offer would be acceptable to shareholders in Europe's largest cash equities market.

The LSE did not immediately comment on the move, which will see Macquarie's hostile bid officially expire on February 28th.

However, the announcement marks the first time in 15 months that the LSE is not operating under the threat of a bid.

Jim Craig, head of Macquarie Group in Europe, said the decision to drop the bid came down to a disagreement over the value of the business.

"The fundamental issue is growth," he said.

"We took the view that it is a low-growth business and it's cyclical. They took the view that there is a lot of growth potential . . . We couldn't find a price [ to offer] that was consistent with our business model."

Analysts said the final blow for Macquarie's bid was the LSE's announcement last Friday that it will significantly increase its gearing and double its planned return of capital to shareholders.

That announcement sent the LSE share price above 800p, (€11.68) effectively signing away Macquarie's offer, they said. Last night, the LSE's shares closed 5.5p higher at 829.5p.

The LSE's status as a bid target officially began on December 13th, 2004, with an unsolicited offer from the Deutsche Börse to acquire it for at least 530p per share.

Shortly afterwards, Euronext, the Börse's Paris-based rival, indicated its interest, though it has never tabled a formal offer.

Macquarie led a consortium which made a formal bid of 580p per share in mid-December, when the London exchange's shares were already comfortably above 600p.