In its latest setback, the US investment fund Fidelity, a Deutsche Börse shareholder -- with 4.5 percent -- and one of the largest investment funds in the world, on Thursday pronounced itself opposed to the takeover of the LSE.

Fidelity said late Thursday it "does not support the bid," although on Friday Fidelity communications director Jörg Moberg told the AFP news agency his group was "still discussing (the matter) with Deutsche Börse management."

Two other funds, Children's Investment Fund Management and Atticus Capital, each of which holds more than five percent in Deutsche Börse's rival Euronext, are also opposed, having determined that the Deutsche Börse offer -- 530 pence per share, or nearly €2 billion ($2.6 billion) -- is too high.

"We think that this strategy compromises the long-term value of (Deutsche Börse," Atticus director David Slager told the French newspaper La Tribune in an article appearing Friday. "We are asking therefore the resignation of the current management and its replacement by one that would undertake a share buy-back."

Deutsche Börse has so far rejected Atticus's request for a special shareholder assembly to discuss the LSE acquisition. Deutsche Börse officials, having initially disdained shareholder unhappiness, have lately softened their tone.

"We are aware of the diverse opinions of our shareholders on the question of our offer for the London Stock Exchange and we are engaged in a dialogue with them," said a Deutsche Börse spokesman.

Critical of the bid

German press reports have said Deutsche Börse shareholders who oppose or are critical of the LSE bid control 30 percent of the Frankfurt operator's capital. If a vote is taken in May at a regularly scheduled assembly they would need only to pass the 50 percent threshold to derail the project.

In Germany, there is also uneasiness at the prospect of transferring Deutsche Börse financial activities to London, which would deprive Frankfurt of some of its stature. On Friday the regional government of Hesse, which includes Frankfurt, demanded to be heard.

"We want more transparency," regional finance minister Karlheinz Weimar told Financial Times Deutschland newspaper.

German media have also said that negotiations between the LSE and British financial circles -- the City -- on the Deutsche Börse initiative have run into difficulties. The City is reportedly demanding that the headquarters of a merged entity be transferred to London, which Deutsche Börse has so far rejected.

Under such circumstances, the chances of a hostile takeover aimed at the LSE are growing, a development that Deutsche Börse head Werner Seifert declined to rule out last week.