Arabs to Buy 20 Percent of Nasdaq, Politicians Question Deal
Friday, September 21, 2007NEW YORK —
Nasdaq Stock Market Inc. struck a complex deal to sell a 20 percent stake to the state-owned Borse Dubai in return for control of Sweden’s leading stock market, but the plan met with some questions from U.S. politicians concerned it would raise security issues.The sale of the Nasdaq stake is part of a flurry of cross-border handshaking unveiled Thursday that holds potential to remake the already shifting landscape of global stock exchanges.
If enacted, the Nasdaq deal would let the exchange meet a long-held goal of planting a flag overseas as its larger rival, the New York Stock Exchange, did this year with the acquisition of Paris-based Euronext.
Nasdaq’s plan would allow it to sidestep a further bidding war with cash-rich Borse Dubai for Sweden’s OMX while Dubai gains footholds in both Nasdaq and the London Stock Exchange.
Nasdaq Stock Market Inc. would pay Dubai 11.4 billion kronor ($1.72 billion) in cash. Borse Dubai would get a 19.99 percent stake in Nasdaq and two of 16 board seats in combined Nasdaq-OMX. Borse Dubai’s voting rights would be limited to 5 percent, however, perhaps to help assuage concerns that a Middle Eastern government would for the first time own a sizable chunk of a U.S. exchange.
Nasdaq plans to use proceeds from the deal to pay down debt and repurchase stock.
The transactions are subject to approval by shareholders and regulators in Europe and the United States. Nasdaq and Borse Dubai said the agreements had unanimous support on both boards.
Political scrutiny could further complicate the desires of the acquisitive exchanges.
President Bush told reporters at a wide-ranging news conference in Washington that he was concerned protectionism would hamper economic growth.
“We’re going to take a good look at it, as to whether or not it has any national security implications involved in the transaction. And I’m comfortable with the process to go forward,” Bush said.
Legal experts said the transaction will face scrutiny by U.S. government agencies and on Capitol Hill, though it’s too early to tell whether steps will be taken to scuttle the deal.
Ronald Meltzer, an attorney at law firm WilmerHale, said political concerns about the Dubai firm’s investment are likely due as much to the company’s Middle East location as any innate security concerns about the deal.
But Nasdaq Chief Executive Bob Greifeld said the initial reception to its plans had been a warm one.
“We’ve had some outreach with politicians today and the response has been very favorable,” he said on a conference call.
Analysts cautioned that the Qatar Investment Authority, which bought 20 percent of the London exchange, could try to disrupt the bid from Dubai, a city-state within the United Arab Emirates.
Dubai has been an aggressive suitor of businesses and tourists as it seeks to diversify its economy beyond its oil wealth, which has helped bankroll a huge boom in business and tourism.
The LSE, (London Stock Exchange) which has fought off a multitude of bids in the past few years, had no immediate comment on the Nasdaq-Borse Dubai deal, but said it welcomed the purchase of a stake by the government of Qatar.
Well Mr. President, protectionism certainly has its place, especially considering the threats, both economic and strategic, when dealing with potential trade deals with anyone from the Middle East.
Is the Securities and Exchange Commission really going to allow Islamofascist nation-states to get a substantial foothold in our economy? It’s bad enough that we trade with the Communist Chinese, now they’re going to allow Bob Greifeld, who incidently hasn’t the slightest idea of how to compute gross profit margin, to give Dubai 20% of Nasdaq’s shares? We rebuffed Dubai’s attempt at controlling vital ports along U.S. coasts for a damned good reason. They, like the majority of the Middle East, are part and parcel to terrorism. They need to stop this insane deal in its tracks; not just for national security, but in the name of common sense.
More on Greifeld’s lack of ‘economic expertise’:
December 2, 2006
Nasdaq chief lacks skills in economics
James Doran, New York
Bob Greifeld, the chief executive of the Nasdaq stock market, admitted under oath that he did not understand how to calculate gross profit margin, one of the most rudimentary formulas in business accounting.
The admission is humiliating for Mr Greifefld, an MBA graduate who is in the thick of a hostile bid to take over the London Stock Exchange, one of the most significant moves of his career.
Mr Greifeld’s lack of basic accounting knowledge was exposed this year during a case in the New Jersey Superior Court. The Nasdaq chief filed a lawsuit against a company called Tours of Enchantment, which had organised a $600,000-plus reunion for his family at a luxurious castle in Ireland.
Tours of Enchantment, run by the Houston entrepreneur Gregory Patrick, claimed that it charged a fee based on cost plus a gross profit margin of 38 per cent.
Mr Greifeld, meanwhile, claimed in his lawsuit that he understood the contract to be based on cost plus a mark-up of 38 per cent. If an item that costs $100 is marked up by 38 per cent, it becomes $138 on an invoice. If the same item is required to show a 38 per cent profit margin, it becomes $162, because gross profit margin is calculated by dividing profit by the selling price of an item.
In an embarrassing courtroom exchange, Richard Mackiewicz, a lawyer acting for Mr Patrick said: “Mr Greifeld, do you understand the difference between a 38 per cent mark-up and a 38 per cent gross profit margin?” “No,” Mr Greifeld replied. The judge in the case ordered that Mr Patrick return masters of a DVD of the family holiday made for Mr Greifeld but threw out all other claims. Mr Patrick, who is to appeal against the decision on Tuesday, claims that he is still owed $70,000 by Mr Greifeld.
Steven Cohen, the lawyer representing Mr Greifeld in the case, declined to comment, and Nasdaq declined to return calls seeking comment.
Mike Warburton, a UK partner at Grant Thornton, said that Mr Greifeld’s lack of knowledge was inexcusable.
“If anyone in business does not know what profit they are making, they shouldn’t be in business at all,” he said. “I know accountants will sometimes try to overcomplicate the equation but, believe me, it really is . . . simple.”
Richard Mackiewicz, lawyer to the defendant: “Mr Greifeld, do you under- stand the difference between a 38 per cent mark-up and a 38 per cent gross profit margin?”
Bob Greifeld, Nasdaq CEO: “No.”
RM: “You do not?”
BG: [shakes head]
RM: “Would I be correct that you do not know how to compute gross profit margin?”
BG: “How to compute gross profit margin?”
RM : “Yes.”
BG: “Under US GAAP?”
RM: “Just do you know how to compute . . .”
BG: “No. [long pause] Under US GAAP. [long pause] I have accountants who do that for me.”
(Edited extract of court transcript in case of Robert Greifeld (plaintiff) against Retention Resources Tours of Enchantment (defendant) and third-party plaintiff Jack Andersen)
Yeah, and this financial genius wants to do business with entities hostile to the U.S. just to ‘pay down debt and repurchase stock’. Just wonderful.