Nordic investor to get seat on OMX board

In an effort to sweeten its offer for Sweden-based exchange owner OMX, Borse Dubai is offering a board seat to a Nordic investor if its $4 billion hostile takeover is successful, according to its chief executive.

Per Larsson said having someone from the Nordic investor community on the board of a delisted OMX was designed to ease concerns over transparency, reported UK newspaper the Financial Times on Sunday.

He said a future OMX board would also include other members from the Nordic and Baltic regions, perhaps current OMX shareholders.

OMX has consolidated stock and derivatives exchanges in Sweden, Denmark, Iceland, Finland and the Baltic countries of Estonia, Latvia and Lithuania.

Concern mounting

Concern is growing in Sweden over Borse Dubai’s bid for OMX and the way in which it went about acquiring its stake in the exchange owner.

Borse Dubai, a holding company for Dubai government's stakes in Dubai Financial Market (DFM) and Dubai International Financial Exchange (DIFX), currently holds 4.9% of OMX and has signed options agreement to acquire an addition 23.5%.

On Friday the company launched a $4 billion cash offer for OMX after at 230 Swedish crowns per share, trumping a deal with US exchange Nasdaq agreed back in May.

Nasdaq's cash and share bid is currently worth 198 crowns per share or $3.7 billion.

Borse Dubai will be hoping its decision to bring Scandinavian investors onto the board will win over OMX management and key shareholders that still favour Nasdaq’s bid, despite Borse Dubai offering more money.

Magnus Böcker has said it is unclear how a takeover bid by Borse Dubai would benefit customers.

While Investor AB, a prominent Swedish shareholder with 10.7% in OMX, has said Nasdaq’s offer may offer better value in the long-term.

The Swedish government, which has a 6.6% stake in OMX, has said that money is not the only factor to consider.

Regulatory attention

Borse Dubai’s tactics have caught the attention of Sweden’s financial regulator, which has given the holding company a deadline of today to provide details of the options contracts Borse Dubai used to acquire the right to buy 23.5% of OMX.

The Financial Supervisory Authority (FSA) is investigating whether Borse Dubai breached Swedish law in its recent bookbuilding operation.

Swedish law requires any purchase of over 10% to have regulatory approval and the regulator is looking into whether Borse Dubai should have disclosed its bid earlier.

If the FSA does not give regulatory approval to the acquisition it could spell the end for Borse Dubai’s attempted takeover.

OMX’s management have also expressed deep reservations about the tactics Borse Dubai used to increase its stake in the company.

"Borse Dubai has not sought the approval of the board or management,” OMX chairman Urban Backstrom told the Financial Times. “This is one of the most peculiar ways to build trust I have ever experienced.”

Despite opposition to its bid by OMX management and certain shareholders, Borse Dubai could still succeed thanks to the large number of hedge funds that have recently bought into OMX.

Hedge funds have acquired around a quarter of OMX stock in anticipation of a full-blown takeover war, and may prefer Borse Dubai due to the higher price it is offering.

If more hedge funds decide to sell to Borse Dubai, allowing it to raise its stake further, other institutional investors may follow, analysts say.

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