Taking Stock


Economic News

22 Jul 2010
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With markets around the world feeling the pinch, Qatar has been taking bold steps in expanding its global investment portfolio. Qatar Holding recently announced it had sold its stake in Nordic stock exchange operator OMX to Borse Dubai, potentially setting up a Qatari bid to take control of the London Stock Exchange (LSE).

On February 13 Qatar Holding, an arm of the state-owned Qatar Investment Authority (QIC), said in a statement it had sold its 9.98% share, equating to 12m shares of the exchange, to Borse Dubai, bringing down the final curtain on Qatar's involvement in the Scandinavian exchange.

The sale also represents the latest steps in a convoluted three-sided dance between Qatar Holding, Borse Dubai and the US exchange operator Nasdaq Stock Market.

Having been thwarted in its efforts to take control of the LSE in late 2006 and early 2007, Nasdaq then turned its attention to OMX but almost instantly ran into competition from Qatar and Dubai.

In October last year, Qatar Holding announced it was seeking permission to gain control of the full 100% of OMX's shares, having acquired a 9.98% stake in September. The Qatari announcement came the same day that Borse Dubai and Nasdaq revealed plans to join forces to take over the Scandinavian exchange operator, teaming up in a deal that would give Borse Dubai a 19.99% slice of the US company and 28% of the LSE.

In early December, the exchange waltz changed tempo, with Qatar Holding issuing a statement saying it had withdrawn its application for ownership assessment, clearing the way for the Dubai-US bid for OMX.

Following the US company's abortive bid for the London exchange, Qatar Holding in turn tried to buy Nasdaq's LSE shares, but was beaten by Borse Dubai. It reacted by grabbing a 20% stake in the LSE, which was reduced to 14% following the exchange's acquisition of Borsa Italiana.

Media observers had suggested that Qatar Holding would do a straight swap with Borse Dubai, handing over its stake in OMX in return for the Emirate firm's approximately 20% holding in the LSE. However, Borse Dubai has denied this, insisting that it would retain its LSE shares as a strategic investment, making it the largest single stakeholder in two of the world's biggest exchanges.

By selling its shares in OMX, Qatar Holding has allowed Borse Dubai to gain at least a 67% stake in the exchange, the level required to approve the takeover and the subsequent deal with Nasdaq.

However, there is little to stop Qatar Holding from trying to increase its stake in the LSE or to branch out elsewhere. Given that QIA has an estimated $60bn in assets, and has announced plans to double that by 2010, there is no question that the QIA and its subsidiaries are eyeing expansion opportunities.

Though it failed in its bid to gain control of UK retailer Sainsbury last year, taking its $20.7bn offer off the table in November, QIA still retains a 25% stake in the company through its investment arm Delta Two. Along with its holdings in the LSE, QIA also has a stake in Singapore health provider Raffles Medical Group and UK-based Four Seasons Healthcare.

In late January, Sheikh Hamad bin Jassim bin Jabr Al Thani, the authority's chief executive and the prime minister of Qatar, said QIA was looking to invest up to $15bn in leading US and European banks.

Sheikh Hamad's comments about buying into Europe's banking sector were strengthened by media reports at the end of January that QIA was considering plans to invest around $3bn in the Zurich-based bank Credit Suisse to acquire around 5% of its shares. Though not directly affected by the ongoing credit crisis, Credit Suisse has seen its share value fall in the general downturn, making it a potentially good investment option.

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