MARKET IN FOCUS: BORSE DUBAI: Illegal moves
In an embarrassment for Dubai, the Swedish financial regulator ruled on 23 August that Borse Dubai acted illegally when it bought shares in the OMX stock exchange earlier in the month. Borse Dubai's move to acquire the 28 per cent stake constituted an undisclosed takeover bid, according to Nordic Exchange Stockholm rules and breached the rules governing takeovers on the stock market.
However, the Financial Supervisory Authority declined to issue a fine, ruling the breach was rectified when Borse Dubai publicly announced its intention to take over the exchange in mid-August. Borse Dubai must now file an official offer document to pursue the deal.
Rival bidderThe ruling will not help Borse Dubai in its battle for the exchange against a rival $3,700 million bid from Nasdaq. That offer, from the far larger and more established exchange, was accepted by OMX in May, but the Swedish exchange is now weighing it against the Dubai bid. Nasdaq has since sold its 31 per cent in the London Stock Exchange in an attempt to bolster its offer for OMX. Borse Dubai is hoping its $4,000 million cash offer is more tempting.
The regulator will now give Borse Dubai a 60-day assessment to see if it is fit to own OMX, a process Nasdaq has already passed.
The move has at least grabbed international attention for Borse Dubai, which was only launched in early August. However there are also important local implications.
Borse Dubai was established as the holding company for the local Dubai Financial Market (DFM) and the offshore Dubai International Financial Exchange (DIFX). The immediate attempt by the two exchanges acting in concert to purchase a stake in another exchange has been seen as a further indication of the likely full merger of the two.
'The deal is part of the co-ordination of both stock exchanges,' says Christian Mouchbahani chief executive officer for the Middle East and North Africa of investment bank Jefferies. 'Both markets are supporting the bid and approaching it as one platform.'
Acquiring OMX could also facilitate the technological integration of the trading platforms, which the exchanges use as well as bring in useful expertise.
'OMX is all about technology,' says a UAE-based investment banker. The DFM already uses OMX trading technology while the DIFX uses the AtosEuronext platform.
Whether it succeeds or fails, the bid raises the profile of the Dubai exchanges, which have both been courting international institutional investors. The DIFX, set up as an international exchange, has so far failed to stir much interest from global investors or companies. There is little trading on the exchange and few equity listings.
Global interest'It gives the DFM and DIFX visibility in addition to attracting a global and regional investor base to create the necessary liquidity. Getting global issuers to list has been one of the problems the DIFX has struggled with,' says Mouchbahani.
The rival takeover attempts for OMX are part of a global trend toward the integration of stock exchanges that the region has bucked so far. OMX is the result of a series of consolidations of Nordic and Baltic exchanges and provides access to 80 per cent of trading in those regions.
The likely merger of the DIFX and the DFM is the first of what market watchers hope will be a chain of consolidations. 'We will see mergers here in the region,' predicts Shuaa Capital's managing director of capital markets Salam Saadeh. 'Exchanges can not survive on their own.'
Victoria Robson
In an embarrassment for Dubai, the Swedish financial regulator ruled on 23 August that Borse Dubai acted illegally when it bought shares in the OMX stock exchange earlier in the month. Borse Dubai's move to acquire the 28 per cent stake constituted an undisclosed takeover bid, according to Nordic Exchange Stockholm rules and breached the rules governing takeovers on the stock market.
However, the Financial Supervisory Authority declined to issue a fine, ruling the breach was rectified when Borse Dubai publicly announced its intention to take over the exchange in mid-August. Borse Dubai must now file an official offer document to pursue the deal. Rival bidderThe ruling will not help Borse Dubai in its battle for the exchange against a rival $3,700 million bid from Nasdaq. That offer, from the far larger and more established exchange, was accepted by OMX in May, but the Swedish exchange is now weighing it against the Dubai bid. Nasdaq has since sold its 31 per cent in the London Stock Exchange in an attempt to bolster its offer for OMX. Borse Dubai is hoping its $4,000 million cash offer is more tempting. The regulator will now give Borse Dubai a 60-day assessment to see if it is fit to own OMX, a process Nasdaq has already passed. The move has at least grabbed international attention for Borse Dubai, which was only launched in early August. However there are also important local implications. Borse Dubai was established as the holding company for the local Dubai Financial Market (DFM) and the offshore Dubai International Financial Exchange (DIFX). The immediate attempt by the two exchanges acting in concert to purchase a stake in another exchange has been seen as a further indication of the likely full merger of the two. 'The deal is part of the co-ordination of both stock exchanges,' says Christian Mouchbahani chief executive officer for the Middle East and North Africa of investment bank Jefferies. 'Both markets are supporting the bid and approaching it as one platform.' Acquiring OMX could also facilitate the technological integration of the trading platforms, which the exchanges use as well as bring in useful expertise. 'OMX is all about technology,' says a UAE-based investment banker. The DFM already uses OMX trading technology while the DIFX uses the AtosEuronext platform. Whether it succeeds or fails, the bid raises the profile of the Dubai exchanges, which have both been courting international institutional investors. The DIFX, set up as an international exchange, has so far failed to stir much interest from global investors or companies. There is little trading on the exchange and few equity listings. Global interest'It gives the DFM and DIFX visibility in addition to attracting a global and regional investor base to create the necessary liquidity. Getting global issuers to list has been one of the problems the DIFX has struggled with,' says Mouchbahani. The rival takeover attempts for OMX are part of a global trend toward the integration of stock exchanges that the region has bucked so far. OMX is the result of a series of consolidations of Nordic and Baltic exchanges and provides access to 80 per cent of trading in those regions. The likely merger of the DIFX and the DFM is the first of what market watchers hope will be a chain of consolidations. 'We will see mergers here in the region,' predicts Shuaa Capital's managing director of capital markets Salam Saadeh. 'Exchanges can not survive on their own.' Victoria RobsonThis content is only available to full MEED package subscribers (MEED magazine and MEED.com).
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