The Dubai Financial Market (DFM) announced Tuesday that it has made an offer to Borse Dubai and Nasdaq OMX Group to acquire 100 percent of Nasdaq Dubai.

The offer, which has been approved by Borse Dubai and Nasdaq OMX, is valued at US$121 million and comprises US$102 million in cash and 40 million DFM shares.

Essa Kazim, a local Emirati, will remain executive chairman at the DFM and Jeff Singer, CEO of Nasdaq Dubai, will also continue at his current position he took over in August 2008.

"This agreement is the outcome of a year-long review and ultimately aims to enhance efficiency and maximize value for all stakeholders," Kazim said in a statement.

Singer also welcomed the takeover, saying, "The combined strengths of the two exchanges will help attract new issuers, from across the region and internationally, who will be able to choose which of the two exchanges is appropriate for them according to their commercial and regulatory preferences."

The DFM was opened for trading in March 2000, while Nasdaq Dubai, formerly DIFX, was launched in September 2005. Both markets came under the umbrella of the holding company Borse Dubai in 2007.

The United Arab Emirates (UAE) major stock markets DFM and Abu Dhabi Securities Exchange (ADX) have a combined market capitalization of US$119 billion. Together, they are No. 2 behind Saudi Arabia with market cap of US$327 billion. At the DFM, there are 64 UAE companies and companies from other Gulf states listed.

Nasdaq Dubai, which will remain as a brand, has currently 17 securities listed. Nasdaq Dubai's reported equity trading volumes rose 20 percent in the first 11 months of 2009 from the same period last year, to 2.68 billion shares.

The exchange introduced compulsory reporting of over the counter trades in September 2008. Trading on its equity derivatives market, launched in November 2008, has expanded quickly in 2009, with more than 110,000 derivatives traded. Nasdaq Dubai has one of the world's largest listed Sukuk, or Islamic bond, markets, with a total nominal value of US$17.3 billion.

"The aim of this transaction is to widen DFM's asset classes for investors, to allow the company's shareholders to benefit from the future growth of Nasdaq Dubai and to further develop closer operational links between the two exchanges," the DFM said in a statement.

For Fahd Iqbal, vice president and head of equity research at investment bank EFG Hermes, the takeover did not occur surprisingly.

"We have long called for a merger between the various exchanges in the UAE and have previously highlighted the likelihood of a merger between the two Dubai-based exchanges in particular," he said.

According to Iqbal, since the DFM and Nasdaq Dubai are respectively supervised by the UAE's Securities and Commodities Authority (SCA) and the Dubai Financial Services Authority (DFSA), which is the main regulatory body of the onshore-hub Dubai International Financial Center (DIFC), a full merger is unlikely as yet.

"We had raised questions over the prospects for a full merger, given that both exchanges operated under different jurisdictions and under different regulatory authorities. This concern remains, and we believe a full merger is therefore unlikely in the short term," he said.

(Xinhua News Agency December 23, 2009)