Dubai Firm Acquires 20% Of Nasdaq
Nasdaq Stock Market Inc. and Borse Dubai have reached a deal under which Nasdaq will take over Nordic bourse operator OMX AB, while Borse Dubai acquires just under 20 percent of Nasdaq and 28 percent of the London stock exchange.
The deal announced Thursday would resolve a takeover battle between Nasdaq and Borse Dubai for Stockholm-based OMX, but could face scrutiny in the United States, where a Dubai-owned company's plan to manage some U.S. ports previously raised an uproar.
Borse Dubai will go ahead with its $4 billion cash bid for OMX, but when that transaction is completed it will sell all shares in the Stockholm-based company to Nasdaq.
In exchange, Nasdaq will pay Dubai 11.4 billion kronor ($1.72 billion) in cash and give it a 19.99 percent stake in Nasdaq. Dubai will also acquire a 28 percent stake in the London Stock Exchange from Nasdaq, which failed to take over the LSE earlier this year.
"Taken together, these strategic actions will provide us with a footprint unlike any other exchange, creating a global exchange leader, with operations in key markets around the world," Nasdaq Chief Executive Bob Greifeld said in a statement.
The deal would help Nasdaq avoid a bidding war with cash-rich Borse Dubai for OMX while Dubai gains footholds in both Nasdaq and the London exchange. OMX operates stock and derivatives exchanges in Sweden, Denmark, Iceland, Finland and in the Baltic countries of Estonia, Latvia and Lithuania.
"By entering into this partnership with Nasdaq, we will benefit from Nasdaq's world-leading brand, technology and platform," Borse Dubai Chairman Essa Kazim said. "In addition, this combination will establish a gateway to large pools of liquidity."
The LSE said it would have no immediate comment on the deal because the situation was still developing.
Dubai is paying 1,414 pence ($28.38) per LSE share, far below the 1,591 pence ($31.93) level they were trading at Thursday as they soared 9.5 percent after the deal was announced.
OMX shares dipped after the announcement but recovered and were up 0.6 percent at 242 kronor ($36.64) in midday trading in Stockholm.
Nasdaq had made its $3.7 billion cash-and-share offer for OMX in May, a proposal supported by both boards and key OMX shareholders. Borse Dubai launched its challenge on Aug. 17 with an unsolicited $4 billion cash bid for OMX.
The competing offers led to speculation that Nasdaq would be forced to raise its bid or make some other arrangement with Dubai, involving its stake in the London Stock Exchange.
Nasdaq had said last month it would sell its 31 percent stake in the LSE to focus on the battle for OMX.
It said Thursday it would sell 28 percent to Borse Dubai to pay down about $1 billion in debt and initiate a stock buyback. It was not immediately clear what Nasdaq would do with the remaining 3 percent of the London exchange.
The deal is subject to approval by shareholders and regulators in Europe and the United States. Nasdaq and Borse Dubai said the agreements had unanimous support in both boards and that they planned to "submit voluntarily the transaction for consideration by the U.S. government."
U.S. Sen. Charles E. Schumer, chairman of the Joint Economic Committee and a senior member of the Senate Banking Committee, expressed doubts about the deal, saying it "will raise serious questions that will need to be answered."
While Borse Dubai would hold a 19.99 percent stake in Nasdaq, the companies said the agreement would cap Dubai's voting rights at 5 percent - perhaps to help assuage any concern about a Middle Eastern government owning a sizable chunk of a U.S. exchange.
Dubai, a Persian Gulf city-state that is part of the United Arab Emirates, has been an aggressive suitor of businesses and tourists as it seeks to diversify its economy beyond its oil wealth, which has helped fuel its building boom and make it a big business hub.
The companies also said that at a later time Nasdaq and OMX would be joined in a new company called The Nasdaq OMX Group Inc. The combined company would have 16 board members, of which OMX would select four and Dubai two, Nasdaq said.
"The combination will create the largest global network of exchanges and exchange customers linked by technology," Greifeld said.
The companies also announced that Nasdaq will invest in the Dubai International Financial Exchange, DIFX, which is owned by Borse Dubai, and provide the exchange with the Nasdaq brand and OMX technology.
By Karl Ritter