The London Stock Exchange's shares rose sharply as analysts said the LSE could find itself vulnerable to a bid if its planned tie-up with Canada's TMX falls apart following a counter offer for TMX.

Over the weekend, a group of Canadian banks and pension funds made a preliminary, $3.7 billion counter offer for Canada's stock market operator TMX, which itself has already agreed to be taken over by the LSE.

The counter-offer from the consortium, which has called itself the Maple Group, trumped the LSE's $3 billion approach for TMX and would prevent Canada's main bourse from falling into foreign hands.

Shares in the LSE were up 2.7 percent in mid-morning trade, as analysts said that if the British company's deal with TMX unraveled in the face of pressure from the Maple Group, the London operator may itself become a bid target.

It potentially makes the LSE a takeover target if its own bid is scuppered, said IG Index sales trader Will Hedden.

Analysts added that if the LSE's TMX deal came apart, the British company would get back cash which would otherwise have been used on the deal, which could also boost its shares.

The LSE said on Monday that it remained committed to an agreed tie up with TMX, but the British company has found itself in the spotlight of predators in the past.

In 2004, Deutsche Boerse made a 1.3 billion pound offer for the LSE, while in 2007 Nasdaq failed in a hostile bid for the LSE.

The LSE's deal with TMX comes as the world's exchanges have sought to consolidate in an increasingly competitive market.

Deutsche Borse is currently trying to merge with NYSE Euronext, while Nasdaq and ICE are themselves working on a $11.1 billion counter-offer for NYSE Euronext.

(Editing by Sophie Walker)

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