|
New York: A plan by Dubai's stock exchange to buy at least 25 per cent of Nordic bourse operator OMX AB, which in May agreed to be acquired by the Nasdaq Stock Market Inc, might draw the US exchange into a bidding war it can ill afford.
Borse Dubai said on Thursday it has bought 4.9 per cent of OMX and had agreements to buy 22.5 per cent more. It is offering 230 Swedish crowns a share for OMX, about 15 per cent higher than Nasdaq's cash-and-stock offer of 206 Swedish crowns a share.
"The Borse Dubai news complicates the Nasdaq bid for OMX and we would view any increase in the bid as a negative," said Deutsche Bank analyst Rob Rutschow.
Nasdaq shares rose nearly five per cent on the news before paring gains to 3.4 per cent by Thursday's close, in a sign that investors think the exchange will not raise its bid.
Borse Dubai - a state-owned holding company recently formed by consolidating two Dubai exchanges - has the means to acquire OMX, and may choose to do so, he said in a note to clients. Even a 25 per cent stake might be enough to block the Nasdaq-OMX deal, he said.
A source said Borse Dubai executives were travelling to Sweden to meet with OMX executives, but that their intention for now is to take a "strategic position".
Expansion
Nasdaq struck a deal with OMX in May, which operates bourses in Sweden, Denmark, Finland, Iceland and the Baltic states, to expand into European stock and options markets.
The New York Stock Exchange bought Euronext in April and the London Stock Exchange - in which Nasdaq holds a 30 per cent stake - recently agreed to acquire Italian exchange operator Borsa Italiana.
Nasdaq earlier led a failed bid to buy the LSE, and the London bourse's deal with with Borsa Italiana hinged on Nasdaq's approval.
Consolidation is driving the industry because technology and competition now allow exchanges to offer trading in a number of sophisticated products.
"It would be a terrible idea for Nasdaq to enter into a bidding war," said Morningstar analyst Patrick O'Shaughnessy.
Nasdaq is paying fair value for OMX and a higher price would dilute shareholder value, O'Shaughnessy said.
In May, Nasdaq's offer valued OMX shares at 23 times projected 2008 earnings, according to analysts' estimates. This compares with the 35 times projected 2008 earnings that NYSE paid for each Euronext share.
"If Borse Dubai makes an offer where they are substantially overpaying, Nasdaq is in a bad position because it looks like it got outplayed if it loses the deal, but if it chases after it, Nasdaq won't be doing shareholders any favours," O'Shaughnessy said.
Nasdaq chief executive Robert Greifeld said Nasdaq's proposal offers more value to shareholders.
"That being said, we would be flexible with regard to the structure of the offer. We certainly have the wherewithal to consider other alternatives," he was cited as saying in a regulatory filing.
Still the choice
"Nasdaq is still the choice of the OMX management at the moment, so they're in the lead position," said Richard Repetto, an analyst at Sandler O'Neill Partners.
Nasdaq could also lobby the Swedish government to block Borse Dubai from acquiring the stake or blocking the deal, based on the argument that the US exchange brings more to the table in terms of technological know-how, analysts said.
Nasdaq, which has a market value of about $3.7 billion, doesn't have much leg room to increase its $3.7 billion offer for OMX.
"Assuming they keep their LSE shares and associated debt, I'm not sure how much leeway they have to add to the cash portion of their offer," O'Shaughnessy said.
But Repetto said Nasdaq will likely not overbid because its management is attentive to financial discipline.
"There will be some flexibility, but I doubt Nasdaq will bid outside their capability," he said.
London (Reuters) The head of Borse Dubai plans to travel to Sweden next week to try to convince shareholders, management and other stakeholders of Nordic bourse operator OMX to agree to a tie-up, sources said.
Per Larsson, chief executive of state-owned Borse Dubai and a former OMX CEO, also plans to meet the Swedish government, which could set the tone for a takeover battle with Nasdaq Stock Market sources said.
Dubai, will argue it can offer OMX a better tie-up than the US company, sources said, adding that Dubai would offer at least the 230 Swedish crowns ($34.26) a share it paid for OMX shares in the market on Thursday.
That would top a friendly cash-and-stock bid from Nasdaq worth about 206 crowns, or $3.7 billion, for the whole of OMX.
Borse Dubai said earlier it had won shares and pledges for 27.4 per cent of OMX. This is short of the number needed to block the Nasdaq deal, which can be amended to lower the number of required acceptances to 66 per cent of OMX shareholders.
"This was not designed to be a blocking stake," said one of the sources. "It was designed to take a strategic position, get a seat at the table."
Dubai will argue it offers OMX better opportunities than Nasdaq, which is more US-focussed, the sources said.
OMX shares surged 6.7 per cent in heavy trade to close at 231.50 crowns, exceeding Borse Dubai's offer of 230 crowns a share on speculation that Nasdaq might sweeten its bid.
Dubai had earlier unveiled an offer for at least 25 per cent. It later said it had bought 4.9 per cent of OMX and had agreements to buy 22.5 per cent more.
Under Swedish securities law, a 30 per cent stake triggers a mandatory bid.
|
