Dubai strikes win-win deal with OMX and Nasdaq

This complicated win-win deal will leave all parties happy except Qatar. Dubai becomes a major shareholder in one of the world's top stock markets and acquires the US technology bourse Nasdaq as a shareholder and business partner. It has taken a 19.99 per cent stake in Nasdaq as part of the deal (although it gets only five per cent voting rights).

In a single coup the emirate has its place at the head table of international finance, and should now be able to develop the soon to be renamed Dubai International Financial Exchange into what it always intended to be, the region's only international stock market.

The US tech market is a powerful ally in this process, bringing a major infusion of technology from its OMX takeover and its huge global brand name.

For the OMX this means the Nordic bourse gets its partner of choice and avoids a bid battle. And for the Nasdaq the OMX acquisition is an answer to rival NYSE Group's $14bn purchase of Euronext last April, with OMX's seven Nordic and Baltic exchanges.

Future plans?

So what next for Dubai with its new US business partner? Clearly the first priority must be some kind of a joint strategic review. Then the Borse Dubai can be rebranded incorporating the Nasdaq name.

Will the Dubai International Financial Exchange and Dubai Financial Market be merged at the same time? It would be logical but might not be practical given the dual regulatory system. Could the Abu Dhabi Securities Market be included too? That would seem unthinkable, but the logic of a unified UAE exchange might now gain a new impetus. Would Abu Dhabi not benefit from the rebranding and technology too?

In short it is hats off to the Borse Dubai team. It has cut a brilliant win-win deal to place Dubai at the centre stage of global finance while winning new friends and showing its ability to influence the direction of a major reshaping of international stock markets. Not bad for a three year old exchange that was launched into a local stock market crash!

Underestimating Dubai

Those who had written off the DIFX will now be left wondering what has happened. But then it is no accident that Dubai has transformed itself from a fishing village to a regional business and increasingly financial capital over the past few decades.

There is a shrewd business culture underpining the success of Dubai, and a pragmatic desire to cut a good deal and make the best out of a given set of circumstances.

Perhaps Dubai would never have won the OMX. Perhaps the Nasdaq would have taken a stake in Bourse Dubai anyway. We will never know. But the important thing now is that Dubai can now get on with the business of building up its stock market(s) from a far stronger position.

See also:
Supermarkets and stock markets attract the Qatar Investment Authority
$4bn Dubai bid for OMX part of a wider financial vision