Dubai Financial Market to acquire Nasdaq Dubai for $121 million

Dubai: The Dubai Financial Market (DFM) announced on Tuesday that it has made an offer to Borse Dubai and The Nasdaq OMX Group (Nasdaq OMX) to acquire 100 per cent of Nasdaq Dubai.

"The aim of this transaction is to widen DFM's asset classes. The ownership structure will create a dynamic new force in the region's capital markets," DFM said in a statement.

"This acquisition was purely based on economic merit. We see more synergies — the merger would allow for dual listings and longer trading hours, increasing revenues, said Eisa Kazim, executive chairman of the Dubai Financial Market.

No restructuring link

Both DFM and Nasdaq Dubai said that the acquisition has nothing to do with the restructuring of government-controlled companies.

"DFM's decision to acquire Nasdaq Dubai was based on economic reasons and had nothing do with the ongoing restructuring of Dubai government-controlled companies," Kazim told Gulf News.

The offer, which has been approved by Borse Dubai and Nasdaq OMX is valued at $121 million (Dh443.5 million) and comprises $102 million in cash and 40 million DFM shares.

The board of directors of DFM was advised by Goldman Sachs International and Al Tamimi & Company in connection with this transaction.

This transaction will bring Nasdaq OMX into the shareholder base of DFM through a minority stake of 1 per cent (equating to 80 million shares, valued at $41 million based on Monday's closing price).

Technology assurance

Meanwhile, Nasdaq OMX will continue to allow Nasdaq Dubai to use its brand and technology.

The Nasdaq OMX stake in DFM will not require issuance of new shares as 40 million shares will be transferred from DFM's existing treasury shares and the other 40 million shares will be purchased from Borse Dubai.

There are 65 companies listed on the Dubai Financial Market index while Nasdaq Dubai has 14 listed companies, including DP World and other securities.

The total consideration for the transaction due from DFM will amount to $121.3 million, of which $80.8 million will be paid in cash to Borse Dubai while 40 million shares of DFM company with a value of $20 million will be transferred to Borse Dubai on behalf of Nasdaq OMX and $20 million in cash to Borse Dubai against the transfer of 40 million shares from Borse Dubai stake to Nasdaq OMX.

To satisfy the regulatory requirements, DFM will restructure itself in the near future by establishing a new holding company. This holding company would wholly own both DFM and Nasdaq Dubai, which would continue to operate as two distinct markets.

Regulatory framework

Nasdaq Dubai will continue to be regulated by the Dubai Financial Services Authority (DFSA).

"Under this new arrangement, Nasdaq Dubai will continue to function under the regulatory framework of DFSA. Meanwhile, many investors will be able to trade seamlessly on both exchanges as key back office functions, such as custody and clearing, will be consolidated early next year," said Jeff Singer, chief executive of Nasdaq Dubai.

Do you think the acquisition of Nasdaq Dubai will boost its prospects as a leading international exchange? How will this help the two businesses? Post a comment by clicking on the link below.