OMX AB would find it difficult to resist a 250 skr per share offer from
the Dubai International Financial Exchange, although such a bid would face close scrutiny from the Swedish government to ensure OMX owned stock markets' continued to comply with local regulations, said analysts.

This morning, reports in the Daily Telegraph said that Dubai International Financial Centre, which owns the Dubai stock exchange, has funding in place to launch a counter bid to the Nasdaq's 208.1 skr per share. And the report may well have legs as the chief executive of the Dubai stock exchange, Per Larsson, is the former chief executive of OMX and as such knows the company and its markets.

Although any bid from Dubai would offer a clear premium, the Swedish government, which owns a 6.6 pct stake in OMX, is flush with cash and firmly focused on the regulatory rather than financial implications of any offer.

'When the Nasdaq came out with their bid the Swedish government said we are positive to the bid, but as a good owner we need to investigate the implications before we say whether we support it or not,' said Gutenbrant, 'They need to be sure whose laws will apply.'

If Dubai International Financial Exchange can demonstrate that the Stockholm, Helsinki, and Copenhagen Stock Exchanges can be run from the United Arab Emirates (UAE) without conflict with local stock market regulations the bid could be backed, said analysts.

'I don't think the Swedish government would have any objection to a bid coming from Dubai, but they would need to investigate to see if there are any negative implications, just as they said they would with the Nasdaq's bid', said Gutenbrant.



OMX's management may take more persuading. The CEO and board have roundly backed the Nasdaq's bid. Some board members would be expected to relocate to Dubai if a bid from the UAE succeeded. However analysts said the company would be unable to reject a higher bid without presenting sound business reasons.

'The management would need to have very good reasons to tell shareholders another 20 pct is not worth it,' Gutenbrant said. 'They would have to demonstrate that being taken over by Dubai would lead to a 20 pct fall in the share price otherwise they can't reject it. It's not important whether the CEO likes the idea of moving to Dubai or not.'

At today's price of 215 skr OMX is already trading at 29 times earnings. This however analysts does not necessarily make an offer of 250 skr per share expensive.

'At these levels you don't buy OMX on valuation, no ones saying 'this is a cheap stock exchange so lets buy it;' this has more to do with strategic positioning, and as (trading) prices are coming down, volumes are becoming increasingly important for the stock exchanges,' said Gutenbrant.

Stock exchanges need to consolidate to extract cost synergies, particularly in Europe where price pressure is becoming intense. As such, consolidation is becoming a defensive necessity rather than an aggressive move.

'It used to be about getting synergies which could be transferred to shareholders, now its about offsetting the negative effects of price pressure,' Gutenbrant said. 'So no one would buy OMX because it's cheap, they would buy it in order to grow their business.'