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Borse Dubai Arm To Buy Nasdaq Dubai for $121 M

22 December, 2009

Dubai Financial Market said it has bid to buy Nasdaq Dubai in a deal worth $121 million to broaden the Gulf Arab bourse’s asset class offering and boost revenues.

The merger, which had been expected to happen for months, comes at a time when Dubai is struggling to deal with a debt crisis and is restructuring government-linked entities. Dubai’s debt crisis has rocked financial markets globally and dented investor confidence in the Gulf emirate.

DFM is majority-owned by Borse Dubai, which also owns two thirds of Nasdaq Dubai with the remaining third held by Nasdaq OMX Group. Borse Dubai is owned by the Dubai government.

“The DFM should get some advantages in terms of getting new products and structures,” said Samer al-Jaouni, general manager if Middle East Financial Brokerage in Dubai.

Dubai’s flagship conglomerate, Dubai World is in talks with creditors to obtain a standstill agreement on restructuring some $22 billion in debt.

The company, which rocked global markets on Nov. 25 with news of its debt woes, met with creditors on Monday and is expected to present a formal standstill proposal in early January.

Borse Dubai, which is wholly owned by the government of Dubai and holds a 21-percent stake in the London Stock Exchange Group,  itself has a $2.5 billion loan maturing in February 2010.

“This acquisition was purely based on economic merit, we see an added value,” Essa Kazim, chairman of Borse Dubai and the Dubai Financial Market, told Reuters.

“We have a lot of cash, almost 2.7 billion dirhams ($735.1 million)… so there is no worries from that end.”

Kazim said the merger would allow for dual listings and longer trading hours, increasing revenues. Shares in DFM rose 3.76 percent on the Dubai index.

The company said its offer — which has been endorsed by Borse Dubai and Nasdaq OMX Group and is subject to conditions including regulatory approval — comprises $102 million in cash and 40 million DFM shares.

The two would operate as independent markets but will combine back office operations and share technology.

DFM said it would restructure itself “in the near future” into a holding company, to meet the guidelines of the two regulatory agencies — Dubai Financial Services Authority and the UAE’s Securities and Commodities Authority — which oversee the bourses.

“This holding company would wholly own both DFM and Nasdaq Dubai, which would continue to operate as two distinct markets,” DFM said in a statement.

There are 65 companies listed on the Dubai Financial Market index .DFMGI while Nasdaq Dubai has 14 listed companies, including ports operator DP World.

Nasdaq Dubai, whose chairman abruptly resigned on Nov. 25, also has a range of listed securities, such as Islamic bonds, or sukuk, issued by property developer Nakheel and Jebel Ali Free Zone Authority, among others.

“It makes sense to integrate the DFM as more of an international platform,” said Matthew Wakeman, managing director of cash and equity-linked trading at EFG-Hermes in Dubai.

“It’s not going to generate massive returns. It’s just a consolidation that was always going to happen.” Dubai set up Nasdaq Dubai, formerly DIFX, in 2005 to encourage local companies to sell shares to the public and to help foreign investors tap regional wealth. Nasdaq OMX acquired a one third stake in Nasdaq Dubai, where shares can list in UAE dirhams and in dollars and according to international protocols, in 2008. Shares on the DFM are listed in UAE dirhams and follow local rules.
 
“The DFM should get some advantages in terms of getting new products and structures,” said Samer al-Jaouni, general manager if Middle East Financial Brokerage in Dubai. Dubai’s flagship conglomerate, Dubai World is in talks with creditors to obtain a standstill agreement on restructuring some $22 billion in debt. The company, which rocked global markets on Nov. 25 with news of its debt woes, met with creditors on Monday and is expected to present a formal standstill proposal in early January.

Borse Dubai, which is wholly owned by the government of Dubai and holds a 21-percent stake in the London Stock Exchange Group, itself has a $2.5 billion loan maturing in February 2010. 

 


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Borse Dubai Arm To Buy Nasdaq Dubai for $121 M

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