Sher Value: OMX bid

In the long history of bidding wars, the OMX issue will eventually go down as just another bid. However, the detail in the fine line is always difficult to read; quite simply NASDAQ, the US exchange, bid $3.7 billion for OMX the Nordic exchange. A few days later Borse Dubai bid $4 billion all cash for OMX, in comparison to the partial cash, partial stock deal of NASDAQ. I am no rocket scientist but clearly the Borse Dubai deal is better, but the surprise is that the management of OMX led by Magnus Boecker have seemingly thrown in their lot with the NASDAQ bid.

First of all the rules of any bid are that the management of the company does not take sides. Secondly, it would seem that the NASDAQ proposal is for Mr. Boecker to the chairman of the combined company that will be created by the NASDAQ-OMX combination. Mostly importantly, the NASDAQ bid also assures the senior management will be given generous pay rises which are built into the plan that NASDAQ has submitted for the combined company.

In the most lenient analysis one cannot escape the fact that management is being bribed by the offer, and clearly it is in their interests to work against the Borse Dubai bid for the company irrespective of the merits of the case. The Wallenberg family, who own 10% of the OMX stock have also joined the fray with comments indicating that the NASDAQ bid might actually be higher when analyzed compared to the Borse Dubai bid! This I must see because the NASDAQ offer in August included a swap of stock of 0.502 stock of NASDAQ for each OMX share that are ofcourse susceptible to the vagaries of the stock market. Nevertheless to say that $3.7 billion is more than $4 billion is not the sort of thing that one’s math teacher will be very proud off.

We also have to consider the argument that a transatlantic link up for OMX is better than a link with the markets in Dubai. NASDAQ’s bid comes on the heals of its failed bid for the London Stock Exchange, and increasing pressure from changes to the way securities are being traded in the US, i.e. the proposed Goldman Sachs ‘single dealer platform’ which will drive exchange driven benefits more into a seamless electronic trading environment. But then this could all be an ego trip for Bob Greifeld, the CEO of NASDAQ who loves to battle; just consider the recent move to block LSE from issuing new stock to funds LSE’s proposed take over of Borsa Italiana.

Compare the conduct of NASDAQ as it battles at home, goes nasty after a failed bid for LSE and then basically is offering silver spoons to the management of an exchange it is trying to take over.

In contrast for OMX the opportunities that come from joining one of the most dynamic financial plays of modern history cannot be under estimated. In the first instance the liquidity that comes from the Gulf and through Dubai is phenomenal and through my days as a banker I know that fund managers love investments coming from this region. What OMX will find is a new doorway opens to them, rather than enter portals into the US market that are frankly well traversed and over valued. Yet I would close on the note that NASDAQ doesn’t fight clean, but were it another other competitor than Brose Dubai, who don’t like ugly battles, the chances are Bob and Boeckr would find themselves fighting legal battles for what is essentially a pay off to management.