Borse Dubai: heading for a Swedish showdown

Each week Arabian Business turns the spotlight on a leading company.

The spelling in this magazine just gets worse and worse...

Actually, it's not a typo. Borse Dubai is the result of the Dubai government's decision to consolidate its holdings in the Dubai Financial Market (DFM) and Dubai International Financial Exchange (DIFX) into a new holding company. The move is in line with the Dubai Strategic Plan 2015, and is designed to demonstrate Dubai's commitment to becoming the leading capital market in the Middle Eastern region.

Another holding company? Hurrah!

Indeed - and Borse Dubai isn't hanging around, either. Via its Sweden-based subsidiary BD Stockholm, it has made a bid in the region of US$4bn for the Swedish market operator OMX. This tops Nasdaq's previously agreed price of US$3.7bn, and means that the UAE has jumped ahead of the US in the queue to secure around 90% of OMX's shares.

And so the winner takes it all?

Not quite yet, as Sweden's Financial Services Authority is threatening to deal a blow to Borse Dubai's bid. The regulator wants to see details of the options agreements Borse Dubai has arranged with hedge funds to acquire a holding of 23.5%, after previously buying a stake of 4.9%. If the FSA rules Borse Dubai has acted illegally, it could refuse to ratify the acquisition.

Those pesky Swedes. Can't they just take the money, money, money?

Very good, but please stop - this is serious. So serious, in fact, that in an effort to sweeten its offer, Borse Dubai is offering a seat on the OMX board to a Nordic investor, if the US$4bn hostile takeover is successful. 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.

Who's fighting the bid then?

OMX CEO Magnus Böcker has said it is unclear how a takeover bid by Borse Dubai would benefit customers. Meanwhile, Investor AB, a prominent Swedish shareholder with a 10.7% stake in OMX, has said Nasdaq's bid may offer better long-term value, and the Swedish government, which has a 6.6% stake in OMX, has emphasised that money is not the only factor to consider.

Sounds like a long list of detractors...

Yes, and 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," sniped OMX chairman Urban Backstrom. "This is one of the most peculiar ways to build trust I have ever experienced."

Oh dear. Won't anyone take a chance on Borse Dubai?

The battle is not yet lost. Borse Dubai could still succeed thanks to the large number of hedge funds that have recently bought into OMX. 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.