Rival Arab suitors put LSE back in play

Rival Arab suitors put LSE back in play

The London Stock Exchange (LSE) is under siege. Two Arab funds have piled into the group in quick succession. The government-backed Borse Dubai moved first. It agreed to buy 28% of US exchange Nasdaq’s stake in the London group for 1,414 pence (about Rs1,130) per share. Hot on its heels, the Qatar Investment Authority announced that it had snapped up 20% of the same group from hedge funds for a pricey 1,585 pence per share. Things are certainly moving fast. Less than a week ago, US operator Nasdaq looked like it was struggling to find an appropriate buyer for the 31% LSE stake it amassed during two failed attempts to buy its trans-Atlantic rival. Now, there are suddenly two buyers clamouring for a place at the top of the London group’s shareholder register.

In each case, the rationale for LSE interest is clear. Nasdaq’s sale of its shares to Borse Dubai is part of a wider strategic deal that ends a bidding war between the two parties. Borse Dubai agreed to swap Nordic operator OMX—if it wins it—for Nasdaq’s LSE stake, plus a further 20% share of the enlarged US group.

Where Dubai goes, Qatar seems to follow. Not only did it buy shares in LSE, but is now snapping up shares in OMX, after telling OMX shareholders not to rush into Dubai’s arms. Qatar is in hot competition with Dubai to establish itself as the region’s main financial hub.

Borse Dubai got the better deal on the LSE shares. It paid a 3% discount to LSE’s previous day’s closing price of 1,453p, a whopping 29% less than Qatar has stumped up. Even if Qatar does eventually put the kibosh on Nasdaq’s plan to win the OMX, Dubai will still get to keep its LSE stake—the two transactions are technically unrelated.

What next? The LSE aren’t likely to welcome Borse Dubai, given its relationship with rival Nasdaq. An assurance from the Qataris that they will not launch a bid—unless a third party does—have secured it a warm reception, for now. Yet the Arab invasion looks to have put the LSE firmly back in play, this time with two deep-pocketed suitors.