Nasdaq, OMX, and Dubai in a 3-way Deal

123jump.com Staff
20 Sep, 2007
New York City

Nasdaq Stock Market Inc, Borse Dubai, and OMX of Sweden have entered in a three way deal that can global impact in the world of financial infrastructure. The three way deal sells Nasddaq 28% stake in London Stock Exchange to Borse Dubai. Dubai will acquire OMX and sell its stake to Nasdaq and acquire 19.9% stake in the U.S. based exchange. The complex deal, though agreed, requires approval from the U.S. authority. Qatar, rival bidder for OMX is still considering to offer higher price for OMX.

[R]11:00AM New York – 4:00PM London – Three way deal between Dubai, Nasdaq, and OMX involved a stake sale in LSE. Qatar is considering revising its higher offer for OMX.[/R]

Borse Dubai, recently formed entity in August of this year from the merger of the Dubai Financial Markets and the Dubai International Finance Exchange has acquired stake in 206 year old London Stock Exchange in a three-way deal with Nasdaq and Sweden’s OMX.

Nasdaq Stock Market Inc has agreed to sell its 28% stake in London Stock Exchange Group to Borse Dubai. Dubai will also take a 19.9% stake in Nasdaq. The two-step complex deal still needs regulatory approval from the U.S. authorities, which is not guaranteed.

Borse Dubai will acquire after paying cash 230 Swedish Kroner or $34.60 per share all of OMX and then sell the entire stake in OMX to Nasdaq for SKr 11.4 billion or $1.7 billion and a 19.9% stake in Nasdaq. The deal values Nasdaq at $41.01. Borse Dubai will also purchase 28% stake in London Stock Exchange from Nasdaq for 14.14 pound or $28.30 per share. Nasdaq will keep its 3% stake in LSE.

Borse Dubai offer for OMX values the entire exchange at SKr 27.7 billion Borse Dubai will have limited voting power of 5% on merged entity of Nasdaq and OMX and will have only 2 of the 16 board seats, according to Nasdaq.

In London trading LSE stock jumped to 1,603 pence and Nasdaq stock in the U.S. increased to $2.06 to $38.08.

Dubai International Finance Exchange, subsidiary of Borse Dubai, will enter into a strategic partnership with Nasdaq and license technology from newly formed Nasdaq and OMX.

The press release from Nasdaq also noted that “Borse Dubai will retain approximately 42.6 million of the NASDAQ shares (representing approximately 19.99 per cent of the fully diluted share capital it receives, restricted to 5.0 per cent of voting rights) with the remaining approximately 18.0 million NASDAQ shares (representing approximately 8.4 per cent of the fully diluted share capital) being held in trust, with an affiliate of Borse Dubai as beneficiary, and managed by an independent trustee. These shares will eventually be sold by the trust. While in the trust, these shares will be voted by the trustee pro rata with the votes of NASDAQ''s other shareholders. Borse Dubai will be limited to a five per cent voting stake in NASDAQ, which is the maximum allowed by NASDAQ''s certificate of incorporation and bylaws.”

Borse Dubai and Nasdaq have been locked in a bidding war to acquire OMX in Stockholm. The three way deal provides Nasdaq an easy way to sell its stake in LSE and acquire OMX and license its technology to Borse Dubai. Borse Dubai is able to acquire a stake in Nasdaq and LSE blunting another rivalry with Qatar, Middle Eastern nation.

Borse Dubai and Qatar are in rival bid to acquire OMX. While OMX board has recommended all cash bid from Borse Dubai, a higher bid from Qatar can topple the currently agreed deal between OMX and Borse Dubai. Qatar urged through its statement to shareholders of OMX not to accept bid from Dubai.

Qatar Investment Authority also said that it has acquired 20% stake in LSE and it is not planning to make an offer for the exchange.

[R]10:00AM New York – Bear Stearns earnings declined 61% on 37.5% lower revenue.[/R]

Bear Stearns revenue in the third quarter declined 37.5% from a year ago to $1.33 billion and earnings fell 61% to $166 million. Earnings per share in the quarter declined to $1.16 from $3.02 per share a year ago.

The annualized return on equity in the third quarter was 5.3% and 13.7% for the last twelve months.

The company ((BSC)) incurred $200 million loss related to BSAM High-Grade hedge fund.

""""The third quarter was characterized by extremely difficult securitization markets and high volatility levels across asset classes. While our fixed income results clearly reflect these market conditions, we reported solid revenues in Investment Banking and record revenues in Global Equities and Global Clearing Services,"""" said James E. Cayne, chairman and chief executive officer.

For the third quarter ended August 31, 2007, earnings were $171 million compared to $438 million a year ago.

Institutional Equities division reported net revenue increase of 53%. Net revenues in Capital Markets segment were down 36% from a year ago to $1.0 billion. Fixed income net revenue were $118 million, down 88% from a year ago. Investments banking net revenues were reported at $211 million, down 9% from a year ago.

Global Clearing Services group reported $332 million in revenue, up 30% from a year ago. Wealth management net revenues for the quarter were negative $38 million compared to $233 million.

Compensation as a percentage of net revenues was 49.9% compared to 48.1% a year ago.

The company authorized quarterly dividend of 32 cents per common share and increased its stock buyback to $2.5 billion from $2 billion.

[R]9:00AM New York – Goldman Sachs earnings jumped 79%. Bear Stearns earnings fell 61%.[/R]

Goldman Sachs ((GS)) reported third quarter revenues of $12.33 billion and net earnings of $2.85 billion. Earnings per share were $6.13 compared to $3.26 billion a year ago and $4.93 billion in the second quarter of this year.

Net revenues in investment banking jumped 67% to $2.15 billion from a year ago. Net revenue in the financial advisory jumped more than 100% to $1.41 billion and equity and debt underwriting revenue increased 8% to $733 million. Revenue from trading and principal investments jumped 70% from a year ago to $8.23 billion and 24% higher than in the second quarter.

The company statement also added that ‘significant losses on non-prime loans and securities were more than offset by gains on short mortgage positions. In addition, net revenues in both commodities and credit products were higher compared with the third quarter of 2006.’

Net revenue in asset management and securities services jumped 35% from a year ago to $1.96 billion. Operating expenses jumped 55% from a year ago to $8.08 billion and compensation and benefit increased 68% to $5.92 billion.

The company declared a dividend of 35 cents per common share and $404.41 per Series A Preferred Stock.

[R]6:00AM New York, 7:00PM Tokyo, Japanese stocks closed up 0.2%. Commodity- related stocks and Real Estate however rallied buoyed by rising metals prices. Japan commercial land prices gains 1% and manufacturing companies to boost capital spending by 6.3%.[/R]

Japanese stocks were largely tepid as losses in technology stocks sparked by 10% fall in DRAM chips weighed on chipmakers. However, commodity related stocks and realty developers gained on rising metal prices and strengthening land prices. Of the Nikkei 225 index 131 stocks advanced, 84 slumped and 10 traded unchanged. Nikkei 225 Index edged up 32 points to close at 16,413.79.

The Ministry of Land Infrastructure and Transport says Japans commercial land prices firmed for the first time since 1991 by 1%. Decline in nationwide residential land prices slowed to 0.7% from 2.3%.

The Cabinet Office and Ministry of Finance survey released today shows that sentiment among manufacturers with one billion yen worth of capital soared 7.7 points this quarter, compared to a loss of 2.2. The gain in confidence was a significant reversal of the pessimism that characterized business in the second quarter. Japanese companies are also planning to increase capital spending, especially on equipment and factories by 6.3% and overall companies from all sectors are likely to increase investment by 1.5%.

Japan Iron and Steel Federation says the August production of crude steel increased for the fifteen month with an increase of 3.7% compared to a year ago to 9.97 million metric tons driven mainly by rising global demand.

Realty developer Mitsui Sumitomo led the rising stocks in the index with a gain of 5.62% on firming land prices, followed by mineral resources company Sojitz Corp, climbing 25 or 5.49%. Hitachi Zosen soared 5.26%, while Marubeni Corporation added 5.21%. Japan Steel Work jumped 4.61% propped up by metal prices.

Metal prices upward spiral, driven mainly by demand from emerging economies, especially China, continues, as copper added 4%, while nickel recorded the biggest rise in three years to 9.9%. Zinc gained 5.1%.

Consumer lender Mitsubishi UFJ led the index decliners with a loss of 13.41% on speculation that falling consumer spending will hurt earnings and reports that the financial institution expects a 100 billion loss this year. Chipmakers Tokyo Electron and Adventist Corp, the world’s biggest memory –chip-testing equipment shed 4.92% and 4.65% respectively. Chubu Electric Power lost 4.49% and Sumitomo Trust retreated 4.48%.

Concerns of declining consumer spending also took their toll on consumer lenders providing unsecured lending such as Aiful, Acom and Promise.

Bloomberg news service reported that according to an analyst at DRAMeXchange, Asia’s largest computer memory chip market, memory prices will drop 10% between $16 and $17 in the first half of this month. Elpida, the largest memory maker, fell 6% and chip makers Advantest and Tokyo Electron declined 5%.