Swedish Politics Seen Key In OMX Takeover Deal

Swedish politics could be more significant than money in the sale of OMX AB, amid moves by Nasdaq Stock Market Inc to shore up its finances ahead of a possible increased bid for the Nordic exchange operator.

Nasdaq said Monday it is reviewing options for its 31% stake in the London Stock Exchange Group PLC, worth around $1.58 billion, a move market-watchers see as a precursor to a higher bid for OMX.

Nasdaq's initial $3.7 billion offer for the exchange operator on May 25, was trumped Friday by a $4 billion offer from government-owned Borse Dubai.

"What's more important right now is politics, not money," said Cheuvreux analyst Fredrik Gutenbrant. He highlighted Borse Dubai's large state ownership, and pointed out that the center-right Swedish government is selling its 6.6% OMX stake as part of its drive to reduce state ownership.


Mia Widell, spokeswoman for Swedish Financial Markets Minister Mats Odell, said Monday that Borse Dubai's state ownership is relevant. "This is one of the things we're looking at," Widell added.


Other Swedish lawmakers also expressed concern about the ownership of the Dubai bourse.


Bertil Kjellberg, a member of the ruling coalition's Moderate party, said he is "hesitant" about OMX being sold to Borse Dubai because "it would replace a state owner with another state owner."


Karin Pilsater, chairman of the Swedish parliamentary committee on industry and trade, said the Swedish government had made a commitment to reduce state ownership of OMX and added that Dubai's "type of government is, to put it mildly, different" to Sweden's.


"The government can't sell OMX to another state-run company," said Chevreux's Gutenbrandt. "Especially when that state is undemocratic."


However, with a less than 10% stake in OMX, the Swedish government alone wouldn't be able to block any OMX sale. Investor AB and Nordea Bank AB, two of OMX's largest shareholders, said Monday they continue to support U.S. exchange's offer for OMX but are evaluating Borse Dubai's bid.


Analysts say the government could raise its OMX stake to somewhere above 10% to secure a blocking minority. They say also that Investor -- which is the investment vehicle of Sweden's Wallenberg family -- isn't likely to make a move that was politically sensitive.


"We're analyzing the new offer," said Fredrik Lindgren of Investor, which has a 10.7% stake. He added, "It's not self-evident" that the Borse Dubai bid is better than the Nasdaq bid.


"Nordea still supports the Nasdaq bid. That hasn't changed," said Boo Ehlin, spokesman for Nordea, OMX's third largest shareholder after the Swedish government.


OMX shareholders who backed the Nasdaq bid agreed not consider rival bids below SEK220 a share.


"But since we are allowed to consider other offers more than SEK220 a share we are now free to analyze the Borse Dubai bid," said Ehlin Monday.


Chevreux's Gutenbrandt said a raised Nasdaq bid "will help the Swedish government justify selling to Nasdaq." He added that a refusal to sell to Borse Dubai "would show that they are really committed to not having state ownership" and that it would be "easy political points' for the government.


Fredrik Reinfeldt's center-right government, which swept to power in September after 12 years of social democratic rule, has consistently trailed in the polls this year.


OMX shares traded up SEK6, or 2.4%, at SEK238 Monday at 1440 GMT, outperforming a 1.2% rise in the broader Stockholm market.

---By Joel Sherwood, Dow Jones Newswires, courtesy Zawya.com