Bourse seals deal
The rivalry between Dubai and Qatar to be the region's leading financial centre was cranked up several notches this week following several new deals.
On 20 September, Borse Dubai announced a complex agreement with the US' Nasdaq in which it will take a 20 per cent stake in the US exchange and most of the shares Nasdaq holds in the London Stock Exchange (LSE).
In return, Nasdaq will gain Borse Dubai's stake in the Nordic stock exchange OMX and take a stake in Borse Dubai subsidiary the Dubai International Financial Exchange (DIFX), bringing branding and OMX technology to the lacklustre exchange.
The deal averts the prospect of a bidding war for the Nordic exchange between Borse Dubai and Nasdaq, and will create the Nasdaq OMX Group, in which Borse Dubai will have a stake.
The outcome is a reversal of fortunes for Borse Dubai. It has been subject to regulatory censure in Sweden and resistance from the board, government and the public to its move on OMX.
'What you need to be a critical mass centre is internationally recognised laws, to apply those laws, and you need liquidity and instruments,' says Zahed Chowdhury, co-head of research at Deutsche Bank.
The DIFX already has the first two and the Nasdaq-OMX tie-up will bring the rest, giving the two-year old DIFX, which has seen little trading, a vital boost.
In a further move towards establishing Dubai as an international financial force, Borse Dubai will take 28 per cent of the LSE, at $28.40 a share, which was previously owned by Nasdaq.
'We are very excited about this significant financial investment in the LSE,' said Soud Baalawy, vice-chairman of Borse Dubai, in a statement.
Also on 20 September, Qatar Investment Authority (QIA) announced it had bought a 20 per cent stake in the LSE in an apparent move to block the Dubai-Nasdaq deal. The LSE has been sympathetic to QIA's offer after rebuffing four previous bids in just three years. Chris Gibson-Smith, chairman of the LSE, is also a non-executive director of the Qatar Financial Centre Authority.
'We cannot block bids but we have had a number of hostile bids that we have seen off,' says an LSE spokesperson.
However, the LSE remains resistant to a full-scale takeover. 'We are interested in a stable, long-term investor that will support the business,' says the spokesperson. 'We are neutral as to where the investor comes from, whether it is Qatar or elsewhere. The Middle East is an area where there is huge growth and opportunity.'
QIA ownership of a stake in the LSE could give Qatari companies listed on the tiny Doha Securities Market international exposure and a chance to list abroad.
'A stake in the LSE would present Qatari companies to the outside world,' says Roy Thomas, senior economist at Qatar National Bank. 'A lot of companies are actually looking to expand internationally.'
The deals are the latest in a series of high-profile transactions pursued by the Dubai and Qatari governments that have kept them in the international spotlight. Acquiring stakes in the LSE has heated up the race between Qatar and Dubai to be a regional financial hub. It is still not clear who the winner will be, but Dubai is now in a strong position.
Victoria Robson
The rivalry between Dubai and Qatar to be the region's leading financial centre was cranked up several notches this week following several new deals.
On 20 September, Borse Dubai announced a complex agreement with the US' Nasdaq in which it will take a 20 per cent stake in the US exchange and most of the shares Nasdaq holds in the London Stock Exchange (LSE). In return, Nasdaq will gain Borse Dubai's stake in the Nordic stock exchange OMX and take a stake in Borse Dubai subsidiary the Dubai International Financial Exchange (DIFX), bringing branding and OMX technology to the lacklustre exchange. The deal averts the prospect of a bidding war for the Nordic exchange between Borse Dubai and Nasdaq, and will create the Nasdaq OMX Group, in which Borse Dubai will have a stake. The outcome is a reversal of fortunes for Borse Dubai. It has been subject to regulatory censure in Sweden and resistance from the board, government and the public to its move on OMX. 'What you need to be a critical mass centre is internationally recognised laws, to apply those laws, and you need liquidity and instruments,' says Zahed Chowdhury, co-head of research at Deutsche Bank. The DIFX already has the first two and the Nasdaq-OMX tie-up will bring the rest, giving the two-year old DIFX, which has seen little trading, a vital boost. In a further move towards establishing Dubai as an international financial force, Borse Dubai will take 28 per cent of the LSE, at $28.40 a share, which was previously owned by Nasdaq. 'We are very excited about this significant financial investment in the LSE,' said Soud Baalawy, vice-chairman of Borse Dubai, in a statement. Also on 20 September, Qatar Investment Authority (QIA) announced it had bought a 20 per cent stake in the LSE in an apparent move to block the Dubai-Nasdaq deal. The LSE has been sympathetic to QIA's offer after rebuffing four previous bids in just three years. Chris Gibson-Smith, chairman of the LSE, is also a non-executive director of the Qatar Financial Centre Authority. 'We cannot block bids but we have had a number of hostile bids that we have seen off,' says an LSE spokesperson. However, the LSE remains resistant to a full-scale takeover. 'We are interested in a stable, long-term investor that will support the business,' says the spokesperson. 'We are neutral as to where the investor comes from, whether it is Qatar or elsewhere. The Middle East is an area where there is huge growth and opportunity.' QIA ownership of a stake in the LSE could give Qatari companies listed on the tiny Doha Securities Market international exposure and a chance to list abroad. 'A stake in the LSE would present Qatari companies to the outside world,' says Roy Thomas, senior economist at Qatar National Bank. 'A lot of companies are actually looking to expand internationally.' The deals are the latest in a series of high-profile transactions pursued by the Dubai and Qatari governments that have kept them in the international spotlight. Acquiring stakes in the LSE has heated up the race between Qatar and Dubai to be a regional financial hub. It is still not clear who the winner will be, but Dubai is now in a strong position. Victoria RobsonThis content is only available to full MEED package subscribers (MEED magazine and MEED.com).
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