Dubai: A complex deal thrashed out between Borse Dubai and Nasdaq yesterday will lead to a series of transactions that will avert a messy takeover battle looming for control of Nordic Exchanges operator OMX.
The agreement is expected to create a global financial marketplace with a unique footprint spanning the US, Europe, the Middle East and emerging markets.
"This outcome is a great achievement for all the players and gives Borse Dubai much more added benefits than what had been contemplated from the initial offer that was extended earlier this week," said Ziad Makkawi, chief executive and founder of Algebra Capital, based in Dubai International Financial Exchange (DIFX).
"It will allow Borse Dubai to position its self as a potential influential global player and leading regional institution in knowledge transfer through it new partnership with Nasdaq,"
As part of the deal Borse Dubai will get a 19.9 stake in Nasdaq (capped at five per cent voting rights) in exchange for all OMX shares to be acquired by Borse Dubai in its offer for OMX.
Nasdaq will become a strategic shareholder and the principal commercial partner of DIFX.
As part of the agreements, Borse Dubai has acquired 28 per cent of the total issued share capital in London Stock Exchange (LSE) from Nasdaq for £14.14 per share.
Borse Dubai will continue its existing offer for OMX of 230 crowns per share in cash, and Nasdaq will continue to offer 11.4 billion crowns ($1.7 billion) and 60.6 million Nasdaq shares.
Nasdaq will eventually withdraw its offer for OMX, and Borse Dubai will open its offer for acceptance. If these conditions are not met by February 15, 2008, or at an earlier date the agreements will terminate and be of no further effect, and both Borse Dubai and Nasdaq may pursue their respective offers independently. The termination date may be extended in certain circumstances.
Assuming the relevant conditions are met, Nasdaq will acquire all the OMX shares already owned by Borse Dubai. In exchange for Borse Dubai's shares in OMX, Nasdaq will issue to Borse Dubai approximately 60.6 million Nasdaq shares and pay approximately 11.4 billion crowns ($1.7 billion) in cash, assuming Borse Dubai acquires all outstanding OMX shares.
This is the same aggregate consideration included in Nasdaq's offer for OMX announced on May 25, and implies that Borse Dubai will acquire new Nasdaq shares at an indicative price of $41.01 per share as of Wednesday's exchange rate. Should Borse Dubai not acquire all outstanding OMX shares, the cash portion of the consideration will be reduced pro rata at a price of 230 crown per OMX share to reflect the actual number of OMX shares sold to Nasdaq.
Borse Dubai will retain approximately 42.6 million of the Nasdaq shares, 19.99 per cent of the fully diluted share capital it receives, but restricted to five per cent of voting rights. The remaining approximately 18 million Nasdaq shares will be held in a trust.
Regulatory hurdles
The agreements are conditional upon a number of regulatory and shareholder approvals in both Sweden and other Nordic and Baltic jurisdictions as well as in the United States and approval by shareholders of Nasdaq.
On completion of the deal, Nasdaq and OMX will be known as The Nasdaq OMX Group, Inc. These agreements have the unanimous support of the boards of directors of Nasdaq and Borse Dubai.
The two exchanges plan to submit voluntarily the transaction for consideration by the US Government.
New board
The board of the combined company will comprise 16 members of which Borse Dubai will be entitled to recommend two directors and OMX four directors.
Borse Dubai's entitlement to recommend two directors is conditional on its maintaining at least 50 per cent of its initial investment. If its investment falls below 50 per cent but remains above 25, it will be entitled to only nominate one director and will be entitled to nominate none at less than 25 per cent.
Despite the lengthy legal clauses attached to the deal both parties said yesterday that the it will enable truly global market platforms.
"The combination provides significant benefits for customers, shareholders and other stakeholders in both companies," said Bob Greifeld, president and chief executive officer of Nasdaq
Borse Dubai welcomed Nasdaq's decision to take a stake in DIFX.
Per Larsson, Borse Dubai's CEO, said: "This transaction is unique and innovative. It is a model for establishing a multinational network of exchanges that works well for investors, listing companies, and associated stakeholders alike."
Eisa Kazim, chairman of Borse Dubai, said: "Our primary objective is to build a world-class, growth-oriented exchange out of Dubai and to become the centre for capital markets activities in the emerging markets. By entering into this partnership with Nasdaq, we will benefit from Nasdaq's world leading brand, technology and platform."
OMX board to assess implications
OMX AB's board said it has noted the joint announcement by The Nasdaq Stock Market Inc and Borse Dubai, and will assess the implications of the structure for shareholders and update OMX shareholders in due course.
"As being one of Europe's most attractive exchanges, our initial response is that the competitiveness for the OMX Nordic Exchange will be secured going forward. In parallel, the possibilities for expansion in the Middle East for OMX exchange technology through Nasdaq's investment in DIFX will increase," said Urban Baeckstroem, OMX chairman, in a statement.
To enable Nasdaq and Borse Dubai to enter into the relevant arrangements, OMX said it has accepted certain amendments to its transaction agreement with Nasdaq.
The Swedish government said it would review a joint bid by Nasdaq and Borse Dubai for Nordic bourse operator OMX presented yesterday. "This is an interesting development and our evaluation will of course include also the recently presented proposal," Financial Markets Minister Mats Odell said in a statement.
The Swedish government owns a 6.6 per cent stake in OMX.
