NASDAQ Bids $3.7 Billion for Nordic OMX

The US stock market NASDAQ has made an offer to buy its Swedish counterpart, OMX, for $3.7 billion. NASDAQ still has pots of money from its failed attempt to by the London Stock Exchange earlier this year for $5.3 billion. The OMX appears to be a good deal for NASDAQ since it operates not just in Scandinavia but it also provides technology for stock trading in places like Hong Kong and Singapore. The offer puts some pressure on the competition.

OMX is based in Stockholm, and it has just about wrapped up control of the market in Scandinavia. Reuters explains that OMX “was formed in 2003 by the merger of the Swedish exchange operator OM and the Helsinki Stock Exchange. It has since acquired the Vilnius Stock Exchange, the Copenhagen Stock Exchange, the Iceland Stock Exchange and a 10 percent stake in the Oslo Stock Exchange.” While each individually isn’t world class, combined this is a middle-weight operation; indeed, OMX is the third largest marketplace for equity-based derivatives in Europe.

Canada’s Investment Executive newspaper claims, “The combined group will have 2,349 employees in 22 countries with pro forma revenue for the financial year 2006 of more than $1.2 billion. The pro forma market capitalization of the Nasdaq OMX Group will be approximately US$7.1 billion, of which Nasdaq shareholders will own approximately 72% and OMX shareholders will hold approximately 28%.” It also says, “Together, the Nasdaq and OMX exchanges will process an average daily volume of 7.4 million trades, representing a value of approximately $61 billion. The exchanges will have approximately 4,000 companies listed from 39 countries with an aggregate market capitalization of approximately $5.5 trillion.”

This leaves the London Exchange as well as the German, Spanish and Italian bourses without any partners in the cross-border trade. This means higher costs, and that in turn means that investors will likely move elsewhere if they can. The obvious solution is for the four to form an alliance of some kind, but thus far, there is little evidence of that. Exchanges have been after partners in other regions of the world, not other countries in the same time zone.

As Morgan Stanley’s investment note on the deal said, “The acquisition of OMX will help diversify Nasdaq away from the competitive U.S. market with geographic exposure through OMX's established position in Europe as well as product diversification with OMX's experience in the equity derivatives business.” Diversity through consolidation may sound like a paradox at best, but it seems it is also the future of global stock exchanges.

© Copyright 2007 by The Kensington Review, Jeff Myhre, PhD, Editor. No part of this publication may be reproduced without written consent. Produced using Fedora Linux.

Home