Petrodollar flush

6 October 2007

The Gulf states are competing for prestigious Western investments, say Jon Ashworth and Allister Heath

The Qataris are separately in the thick of the power-juggling at the world’s premier stock exchanges, which has seen Doha pitted against Dubai and America’s Nasdaq in a battle that encompasses London and Stockholm. Last week, Borse Dubai bought minority stakes in New York’s Nasdaq and the London Stock Exchange (LSE), putting in place the framework for a transcontinental trading platform with London at its centre and links to markets in Dubai, Scandinavia and the US. Borse Dubai agreed to buy 28% of the LSE and a 19.99% stake in Nasdaq, including 5% voting rights.
The move provides yet another challenge for Clara Furse, the LSE chief executive, who had only recently celebrated getting rid of Nasdaq, the siege veteran-turned-grumpy stakeholder.

In an equally dramatic move, the Qatar Investment Authority (QIA) separately acquired a 20% stake in the LSE and 9.98% of OMX, moves intended to frustrate Dubai’s ambitions. Nasdaq and Dubai had been competing for control of OMX; instead, they appear to have struck a deal in which Nasdaq wins OMX while investing in Borse Dubai’s operations. The Qataris urged OMX shareholders to take no action on the offer from Nasdaq/Borse Dubai.

The Qataris appear to have paid well over the going rate for their shares; they can afford to. The OMX stake-building reputedly saw shares bought at SK245 (£18.64), well above the SK230-a-share offer from Borse Dubai. The Qataris snapped up its LSE stake by raiding the market after losing out to Dubai in the auction for Nasdaq’s holding. QIA reputedly bought its LSE shares from US hedge funds, paying more than £15.80 a share; Borse Dubai paid £14.14 a share for Nasdaq’s LSE stake.

The Gulf influence at the LSE will weaken a little next month, when Furse’s acquisition of Borsa Italiana is completed. Borse Dubai and QIA will see their holdings diluted to about 20% and 14% respectively; a group of Italian banks will become the LSE’s largest shareholder with a 28% stake. Yet Arab oil money will remain a key influence in shaping the LSE’s future strategy.