NASDAQ OMX to cut losses in Dubai
Dec 30, 2009
Exchange sells stake in NASDAQ Dubai and takes $81 mn charge
The financial market meltdown in Dubai continues to impact investors beyond the Dubai real estate market. NASDAQ OMX announced last week that it will absorb an $81 mn pre-tax non-cash impairment charge as it sells its 33.3 percent stake in NASDAQ Dubai for $120 mn to the state-controlled Dubai Financial Market (DFM) less than two years after the deal launched.
Once the transaction is completed next year, NASDAQ OMX will hold a one percent ownership stake in DFM, a publicly traded company controlled by Borse Dubai, and will retain the right to nominate one NASDAQ Dubai director. Existing technology and trademark licensing agreements will remain intact. NASDAQ Dubai will continue to exist as a distinct exchange under DFM's ownership, but separately regulated.
NASDAQ Dubai was originally created in February 2008 as part of a deal that enabled NASDAQ to purchase the Nordic Stock exchange, OMX, from competing bidder, Borse Dubai. From Dubai’s perspective, the acquisition supports the 2015 Dubai Strategic Plan which has targeted financial services and capital markets as key focus areas.
At the time, NASDAQ’s president and chief executive officer Bob Greifeld said in a release that the deal ‘paves the way for NASDAQ to create the world's largest exchange company that will set the standard for global electronic trading and public company services, and provide the premier infrastructure for financial markets around the world.’
Adena Friedman, chief financial officer of NASDAQ OMX and NASDAQ Dubai board member, views the future differently. In a press release announcing the deal she says ‘the combination of the two Dubai exchanges has long been seen as a preferred way forward. It will create greater efficiencies from a systems perspective, enabling retail investors to better access NASDAQ Dubai and providing issuers with a choice of commercial and regulatory structures.’
NASDAQ’s initial investment of February 2008 consisted of $50 mn in cash, in addition to specific technology and trademark rights, and was at the time valued at $128 mn. It has a current carry value of $120 mn with the one percent stake valued at approximately $39 mn, thus the $81 mn write-down. After a spate of acquisitions, NASDAQ had $5.4 bn in goodwill and 1.8 bn in intangible assets as of December 31 2008, according to company filings.
NASDAQ Dubai spokesman Mark Fisher says that the exchange currently has 16 equity listings. ‘Four of these are GCC companies (DP World, Depa, Damas and Al Baraka). The others are based in countries around the world e.g., Gold Fields (South Africa) and Hikma (UK). Two US-based companies are listed on NASDAQ Dubai - these are NASDAQ OMX and Netsol. These two rarely trade (well under one percent of total trading volumes),’ he says. Most stocks on DFM are Dubai-based companies or government entities.
By Brad Allen