THE value of the London Stock Exchange (LSE) soared yesterday at the prospect of a bidding war after a takeover approach from Nasdaq.

Shares in LSE were up by nearly a quarter at 1090p, adding more than £500m to its value, after details of the 950p-a-share proposal from Nasdaq emerged on Friday night.

Nasdaq is home to more than 3,200 companies, including Google which chose the exchange for its landmark flotation in 2004.

The Nasdaq stock market is the second largest market in the US. Nasdaq is an acronym for the market's electronic communications facility - National Association of Securities Dealer Automated Quotations system, designed to facilitate over-the-counter stock trading.

LSE rejected the £2.43bn approach, but the value of the company soared to £2.93bn yesterday as investors anticipated a higher offer and digested reports that the New York Stock Exchange (NYSE) and Euronext may be also be interested.

Shares in LSE have rocketed from 450p less than a year ago to an all-time high yesterday.

The takeover race was launched by German exchange Deutsche Boerse, with its £1.35bn approach in late 2004, although it later walked away in the face of unrest among its own shareholders.

That bid was followed up by strong interest from Macquarie, which only waned last month when the Australian bank refused to increase its offer of 580p a share.

The LSE revealed details of the approach by Nasdaq after the stock market closed on Friday. Reports later said that US rival NYSE was interested and pan-European exchange operator Euronext could also enter the race.

LSE has stood firm throughout the takeover process and insisted each offer was too low, including last week's proposal from Nasdaq. It recently said it would return £510m to shareholders and increased its dividend payment by seven per cent in an attempt to highlight its value to investors.

Richard Hunter, head of equities at Hargreaves Lansdown Stockbrokers, said: "There may yet be chapters to unfold and hurdles to be overcome - final agreement by the LSE management to a higher bid, regulatory approval on both sides of the pond, or even a last-ditch attempt by Euronext or Deutsche Boerse to enter the fray - but this latest move to acquire the LSE has all the hallmarks of being the beginning of the end of its independence.''

A tie-up between LSE and a US exchange would create the first major transatlantic stock exchange company.