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DFM Bids for 100pc Stake in Nasdaq Dubai

(Rocel Felix) / 23 December 2009

DUBAI - Stock market operator Dubai Financial Market PJSC, or DFM, made an offer on Tuesday to buy rival Nasdaq Dubai for $121 million to expand its asset class offering and raise 
additional revenue.

The offer to acquire 100 per cent of Nasdaq Dubai comprises $102 million in cash and 40 million DFM shares. Nasdaq Dubai is an international financial exchange that currently lists shares, derivatives, exchange-traded commodities, structured products Sukuk, or Islamic bonds, and conventional bonds.

The bourse operator, in a filing at the Dubai Financial Market on Tuesday, said the offer was endorsed by the company’s board of directors on December 21.

“This deal is advantageous for DFM since it would give us access to a new platform, including one of the biggest Sukuk markets,” Essa Kazim, executive chairman of DFM PJSC told Khaleej Times.

“It will provide choices for companies to list under another regulatory framework, and we will have a much wider asset class. We will certainly benefit from the revenue side, we will be able to benefit from the economies of scale, and streamline our costs as well,” added Kazim.

Kazim said unifying the two bourses will strengthen Dubai’s role as a center of capital markets. He said the integration of the two exchanges, will allow for dual listings and longer trading hours. The two will also continue operating as independent markets but will combine back office operations and share technology.

The deal, which is expected to be sealed in six weeks,  will need the regulatory approval of the Dubai Financial Services Authority and the UAE’s Securities and Commodities Authority.

DFM PJSC, which tapped Goldman Sachs International and Al Tamimi & Company for this transaction, said it will restructure itself in the near future by establishing a new holding company that it will jointly owned with Nasdaq Dubai.

DFM PJSC is majority-owned by Borse Dubai, that also owns two thirds of Nasdaq Dubai. The remaining one third of Nasdaq Dubai is controlled by Nasdaq OMX Group.

In a separate statement, the Nasdaq OMX, said Nasdaq Dubai, in which it holds a 33 per cent equity stake, will become a wholly-owned subsdiary of DFM PJSC.  In return, Nasdaq OMX will receive a one per cent ownership interest in DFM PJSC which is capitalised at $3.9 billion. It will also retain the right to nominate one Nasdaq Dubai director.

“The new structure will enable DFM and Nasdaq Dubai to benefit from each other’s regional and international strengths, creating a more powerful capital markets hub that  is unique in the Gulf Co-operation Council countries,” said Nasdaq Dubai Chief Executive Officer Jeff Singer.

Analysts see the merger, that has been talked about in the markets for months, as an attempt to revive investor confidence in Dubai’s financial markets. The surpise call for a debt standstill by state-owned conglomerate Dubai World on November 25, has roiled global markets, and continues to be a lingering concern for investors, who are worried about the emirate’s capability to repay its maturing debts without the support of UAE capital, Abu Dhabi.  The capital already injected $10 billion to Dubai on December 14.

“This is definitely a positive step, coming as it is with so many restructuring of companies in different sectors. It will help the capital markets recover some ground,” said Samer Al Jaouni, general manager at Middle East Financial Brokerage.

Haissam Arabi, president and CEO at Gulfmena Alternative Investments, said the move fits into the strategy of bolstering Dubai as a financial hub. 

“It will also help to strengthen DFM’s balance sheet as it has lots of cash on hand, while the knowledge sharing between the two entities would be in the best interest of investors, having a single account would make it simpler for investor to make transactions,” said Haissam Arabi, president and chief executive officer at Gulfmena Alternative Investments.

Vyas Jayabhanu, head of investments at Al Dhafra Financial Brokerage in Abu Dhabi, said the merger will make the Dubai bourse more accessible to foreign investors.

“Investors will have an additional platform with which they can trade different instruments, the deal will mean added value for global and international investors.”


With input from agencies

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