Sweden’s financial regulator may issue a ruling as early as today on whether Borse Dubai legally acquired a stake in the Nordic exchange owner OMX prior to launching its takeover bid.
If the Financial Supervisory Authority (FSA) judges Borse Dubai broke the law in the way it built up its stake, it could force the state-owned holding company to pull out of the running and hand victory to US exchange operator Nasdaq, reported UK newspaper the Financial Times.
Borse Dubai launched a $4 billion all-cash offer for OMX on August 17 after a bookbuilding operation that saw it acquire the rights to buy up to 23.4% of the exchange owner. The company already owns 4.9% of OMX.
Borse Dubai’s bid at 230 Swedish crowns per share trumped a $3.7 billion cash-and-shares bid from Nasdaq agreed back in May.
The FSA has demanded details of the options contracts Borse Dubai used to acquire 23.5% of OMX before it gives regulatory approval to the acquisition – and therefore also to Borse Dubai ‘s hostile takeover bid.
Swedish law requires any purchase of over 10% to have regulatory approval and the regulator is looking into whether Borse Dubai’s bookbuilding operation constituted a takeover bid, and therefore whether it should have disclosed its bid earlier.
If the FSA rules against Borse Dubai, it will have to file a formal offer document within a month from its launch bid and can be fined up to 100 million crowns ($14.4 million) if it fails to do so by the deadline.
Borse Dubai can still proceed with its takeover offer if the FSA rules against it, but it must also file an official application with the FSA to own the market operator as Sweden treats OMX as a strategic industry and its owner must be approved by the regulator.
The FSA would then launch a full 60-day investigation into Borse Dubai’s capability and suitability to be OMX’s owner. Experts said it was unlikely that the regulator would accept a company that had contravened Swedish law would be a fit and proper owner of OMX, reported the Financial Times.
Enticing hedge funds
Nasdaq on Monday revealed how it plans to win over key hedge fund investors in OMX, which reportedly favour Borse Dubai’s bid due to the higher price it is offering.
The US exchange operator is prepared to allow OMX shareholders to only buy shares, a tactic which should free more cash to entice hedge funds, who own around 25% of OMX.
Nasdaq chief executive Bob Greifeld told the Financial Times that two of OMX’s largest shareholders had already agreed to accept shares, including Investor, the holding company of the Wallenberg family which owns 10.7%, and Nordea, a bank which controls 5.3%.
If Nasdaq can convince more institutional OMX shareholders to forgo the cash element by emphasising the longer-term benefits of its offer, it will help level the playing field between the two exchange companies.
Greifeld said that other institutional shareholders could follow Investor and Nordea’s lead.
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