KEY POINTS:
An agreement between Nasdaq Stock Market and Borse Dubai to buy stakes in one another to create a group of exchanges linking the United States, Europe, the Middle East and Asia may be a sign of things to come in cross-border dealmaking.
Such alliances could become a way
for corporations to get around some political sensitivities about outright takeovers of key national assets, one expert said.
In one stroke, Nasdaq's complex deal allows it to gain a key ally in one of the wealthiest areas of the Gulf, get control of Nordic markets operator OMX, and unload its stake in London Stock Exchange.
"This kind of exchange in the sense of swapping stakes, this reciprocal cross holding, is possibly a substitute for a straight merger because there would be political difficulties in a straight merger," said international securities expert John Coffee, a Columbia University Law School Professor.
"By finding a deep-pocketed, oil-rich ally, it becomes more possible for Nasdaq to pursue ambitions on a global stage," Coffee said.
Nasdaq chief executive Bob Greifeld said he did not anticipate regulatory hurdles to the deal because Borse Dubai's voting rights in Nasdaq would be "severely restricted" at 5 per cent.
Nonetheless, US politicians immediately expressed concern about the deal. President George W. Bush said the proposed Nasdaq deal would be examined under a newly strengthened law that reviews foreign investments in US companies.
The law came about after criticism last year when US officials approved the acquisition of some key United States port operations by state-owned Dubai Ports World.
Some lawmakers, however, said Dubai's acquisition of a 20 per cent stake in Nasdaq did not prompt any national security concerns.
"It doesn't raise alarm bells," House Speaker Nancy Pelosi, a Democrat, said. "This is a marketplace issue."
Whether it is alliances or outright mergers, foreign partners seem certain to play a huge role in the development of US organisations.
Foreign companies have announced about US$267 billion ($367.3 billion) worth of US acquisitions so far in 2007, up from US$166 billion at the same stage of 2006, according to research firm Dealogic.
Buyers from north Asia and southeast Asia have announced US$16 billion of US acquisitions so far this year, up from only US$2 billion for the whole of 2006, Dealogic said.
- Reuters