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Sunday, November 29 - 2009

Regulatory risks offset upside for Nordic Exchange Operator OMX, says S&P Equity Research

  • United Arab Emirates: Saturday, September 01 - 2007 at 16:03
  • PRESS RELEASE

Nasdaq's proposed sale of its stake in the London Stock Exchange could give it more flexibility to pursue an acquisition of Nordic exchange operator OMX, according to Standard & Poor's Equity Research, the world's leading provider of independent investment research.

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However Borse Dubai could raise its offer further beyond Nasdaq's financial reach, given regulatory approval.

"The crucial point is whether Borse Dubai is deemed fit to own the Nordic exchange, given the Swedish authorities have judged that Borse Dubai's initial purchase of a stake and options on August 9 should have been, but was not, accompanied by a formal offer," said Standard & Poor's Equity Research banking analyst Derek Chambers. OMX management, which has supported the Nasdaq offer, has sent a request for information to Borse Dubai on its offer.

Standard & Poor's Equity Research calculates the current value of the Nasdaq offer for to be SEK205 per OMX share. This includes a cash element of SEK94.3 and 0.502 Nasdaq shares. Borse Dubai's cash offer of SEK230 per share tops the original SEK208 Nasdaq bid.

Mr Chambers said three were three main scenarios that may play out: firstly, Borse Dubai does not obtain regulatory approval, in which case Nasdaq can maintain its original offer; secondly, Borse Dubai wins regulatory approval, in which case Standard & Poor's Equity Research believes it would be likely to gain control, either at its original or a higher price; or finally, other circumstances or alternative bidders force Nasdaq to increase its price.

"Although the latter two scenarios would give upside, we believe the first scenario (Nasdaq winning at its original price of SEK208 per OMX share) remains the most likely," Mr Chambers added, downgrading his recommendation on OMX to Sell from Hold. "We therefore now recommend taking profits in OMX."

OMX's shareholder base has undergone considerable change since the end of March 2007. On the latest information, but before the Borse Dubai share and options acquisitions, Swedish shareholders (at end July) held 40.8% of the shares, US and UK holders represented 43.2%, and Finnish, Danish and Icelandic holders 5.9%, with the balance mainly in north-west Europe.

"It seems likely that a significant proportion of the non-Nordic shareholders are now awaiting a higher bid," Mr Chambers added. "The imposition of regulatory obstacles on Borse Dubai would make such a bid much less likely."

Separately, Standard & Poor's Equity Research has raised its current year earnings per share forecast on OMX by 3%, citing strong turnover on OMX's Nordic Exchanges continuing into August from July. Underlying turnover rose 65% in July, and transaction volumes were up over 100% in the first three weeks of August.
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