06 February 2008
Borse Dubai, the government-controlled parent company of both of Dubai's stock exchanges, last week drew closer to completing its buy-out of Nordic and Baltic exchange owner OMX AB. The deal, which has been on the table since last August, involves a complicated joint transaction with the US exchange NASDAQ and is expected to eventually result in Borse Dubai acquiring a significant stake in the London Stock Exchange (LSE).
Recent developments have helped move the deal along.
On January 31 the Swedish government, which owns a 6.6% stake in OMX, announced its backing for Borse Dubai's offer of $4.9bn. On the same day, OMX released its full year report, showing a 32% decline in fourth quarter profits, due, it said, to rising costs. The company saw its fourth-quarter net profit dip to $31.6m from $46.6m in the same period last year.
This prompted Borse Dubai to state it would file a supplement to its offer the following day, giving OMX shareholders the right to withdraw their acceptance for five days following the registration of the supplement, which is expected to take place on February 5. Borse Dubai said it would extend the acceptance period an additional five days, thus pushing back the final settlement of the deal.
Then it was reported on Saturday that Borse Dubai had secured funding of $5.8bn from a consortium of six banks: UK-based HSBC, which is acting as Borse Dubai's advisor for the deal, Bank of Tokyo-Mitsubishi, Barclays, Citigroup, Emirates Bank and Goldman Sachs. The loan will have a maturity period of one year. For its part, NASDAQ secured a $2bn loan from Bank of America and JP Morgan in September 2007 to back the US exchange's part of the joint bid with Borse Dubai.
The deal for OMX has demonstrated notable intent on the part of Borse Dubai. Borse Dubai and NASDAQ merged their rival bids for OMX in September 2007, offering $40.9 per share - a 52% premium on the closing price on May 23, 2007 when NASDAQ made its initial offer.
Under the terms of the deal, NASDAQ will eventually secure ownership of OMX - thus securing its strategy of gaining a foothold in the European market. This is conditional on Borse Dubai gaining at least 67% of OMX's shares following completion of its offer, which it will then sell on to NASDAQ. Based on a deal made in September 2007, Borse Dubai agreed to take a 19.9% stake in the NASDAQ and to buy the US exchange's 28% stake in the LSE, acquired by NASDAQ during its failed bid for control. Borse Dubai already owns 20% in the LSE.
Through these deals, Borse Dubai will gain a foothold in the upper echelons of global finance. The company was originally formed by the emirate in August 2007 to further its strategy in this direction. OMX was a strong choice for acquisition, bringing with it not only exchanges in Stockholm, Helsinki, Copenhagen, Iceland and the Baltic states - "one of the largest liquidity pools in the world" as Borse Dubai described it - but also OMX's exchange-running software. The latter is an important tool for improving Dubai's standing in the world of finance, helping to diversify the economy away from its dependence on oil revenues and compete in a lucrative global market.
The news of the offer is good for market confidence in general, coming on the back of mixed messages at last weekend's Abu Dhabi Economic Forum. Youssef Nasr, chief executive of HSBC Holdings Middle East, warned delegates that a recession in the US would likely have an indirect impact on the region's economy due to reduced demand for oil.
However, Karim El Sohl, CEO of United Arab Emirates-based investment firm Gulf Capital, was among several speakers to claim the slowdown would not affect the UAE. "I don't think international markets are having an impact on local markets," he told delegates.
Whatever the case, there can be no doubt that the appetite of banks to finance a large acquisition such as Borse Dubai's and NASDAQ's demonstrates a degree of resilience to global market turbulence.
Borse Dubai, the government-controlled parent company of both of Dubai's stock exchanges, last week drew closer to completing its buy-out of Nordic and Baltic exchange owner OMX AB. The deal, which has been on the table since last August, involves a complicated joint transaction with the US exchange NASDAQ and is expected to eventually result in Borse Dubai acquiring a significant stake in the London Stock Exchange (LSE).
Recent developments have helped move the deal along.
On January 31 the Swedish government, which owns a 6.6% stake in OMX, announced its backing for Borse Dubai's offer of $4.9bn. On the same day, OMX released its full year report, showing a 32% decline in fourth quarter profits, due, it said, to rising costs. The company saw its fourth-quarter net profit dip to $31.6m from $46.6m in the same period last year.
This prompted Borse Dubai to state it would file a supplement to its offer the following day, giving OMX shareholders the right to withdraw their acceptance for five days following the registration of the supplement, which is expected to take place on February 5. Borse Dubai said it would extend the acceptance period an additional five days, thus pushing back the final settlement of the deal.
Then it was reported on Saturday that Borse Dubai had secured funding of $5.8bn from a consortium of six banks: UK-based HSBC, which is acting as Borse Dubai's advisor for the deal, Bank of Tokyo-Mitsubishi, Barclays, Citigroup, Emirates Bank and Goldman Sachs. The loan will have a maturity period of one year. For its part, NASDAQ secured a $2bn loan from Bank of America and JP Morgan in September 2007 to back the US exchange's part of the joint bid with Borse Dubai.
The deal for OMX has demonstrated notable intent on the part of Borse Dubai. Borse Dubai and NASDAQ merged their rival bids for OMX in September 2007, offering $40.9 per share - a 52% premium on the closing price on May 23, 2007 when NASDAQ made its initial offer.
Under the terms of the deal, NASDAQ will eventually secure ownership of OMX - thus securing its strategy of gaining a foothold in the European market. This is conditional on Borse Dubai gaining at least 67% of OMX's shares following completion of its offer, which it will then sell on to NASDAQ. Based on a deal made in September 2007, Borse Dubai agreed to take a 19.9% stake in the NASDAQ and to buy the US exchange's 28% stake in the LSE, acquired by NASDAQ during its failed bid for control. Borse Dubai already owns 20% in the LSE.
Through these deals, Borse Dubai will gain a foothold in the upper echelons of global finance. The company was originally formed by the emirate in August 2007 to further its strategy in this direction. OMX was a strong choice for acquisition, bringing with it not only exchanges in Stockholm, Helsinki, Copenhagen, Iceland and the Baltic states - "one of the largest liquidity pools in the world" as Borse Dubai described it - but also OMX's exchange-running software. The latter is an important tool for improving Dubai's standing in the world of finance, helping to diversify the economy away from its dependence on oil revenues and compete in a lucrative global market.
The news of the offer is good for market confidence in general, coming on the back of mixed messages at last weekend's Abu Dhabi Economic Forum. Youssef Nasr, chief executive of HSBC Holdings Middle East, warned delegates that a recession in the US would likely have an indirect impact on the region's economy due to reduced demand for oil.
However, Karim El Sohl, CEO of United Arab Emirates-based investment firm Gulf Capital, was among several speakers to claim the slowdown would not affect the UAE. "I don't think international markets are having an impact on local markets," he told delegates.
Whatever the case, there can be no doubt that the appetite of banks to finance a large acquisition such as Borse Dubai's and NASDAQ's demonstrates a degree of resilience to global market turbulence.
© Oxford Business Group 2008
