London exchange 'mulls over tie-up' with Dubai bourse

Pact may involve holdings in each other, dual listings of Mid-East firms


LONDON - THE London Stock Exchange (LSE), which has fought off four takeover bids in two years, is considering an alliance with its Dubai counterpart, The Observer newspaper reported yesterday.

The LSE, Europe's largest equity market, is one of six parties that have held talks with the Dubai International Financial Exchange (DIFX), and the alliance could involve the acquisition of cross-shareholdings, the paper said.

According to the paper, an LSE spokesman would only say: 'We're looking at a range of options involving exchanges within different geographies.'

Dr Omar bin Sulaiman, the governor of the Dubai International Financial Centre, which owns DIFX, played down the idea of an imminent deal.

However, sources told The Observer that an alliance involving a collaboration on trading systems, joint marketing ventures and the cross-listing of exchange-traded funds was a real possibility in the near term.

'Acquiring equity stakes in each other could come

later,' a London-based investment banker with knowledge of the situation was quoted as saying.

Dubai's ruler, Sheikh Mohammed bin Rashid Al-Maktoum, said last week that the country was looking to spend billions of dollars this year to diversify its cash holdings through international acquisitions, noted the paper.

A pact between the LSE and Dubai would be significant because it would put London in pole position for secondary listings of Dubai companies which the Gulf state intends to partially privatise in the next 18 months, The Observer said.

First off the block could be DP World, the Dubai group which two years ago clinched British ports giant P&O for nearly &pound4 billion (S$11.9 billion), said the paper.

Emirates, the airline which sponsors Arsenal's new football stadium, would probably be next, followed by the Jumeirah hotels and leisure conglomerate, it added.

The primary listings would be on the DIFX, which the Dubai government had hailed as marking the birth of the Arab 'Hong Kong' when it launched the exchange in 2005. The Dubai government would thus retain majority holdings in the companies and could raise billions from the sales through initial public offerings, said The Observer.

A Dubai investment arm already has a 3.5 per cent share of Euronext, the pan-European exchange operator that recently merged with the New York Stock Exchange.

It has also bought stakes in firms such as Daimler Chrysler, London-based Standard Chartered Bank, Tussauds Group and Time Warner.

The LSE successfully fended off a hostile &pound2.7 billion takeover bid from Nasdaq Stock Market in February. The American firm retains a 29 per cent stake in the London bourse but has signalled that it will not block any expansion attempt by the LSE.

Last month, the LSE agreed to cooperate with the Tokyo Stock Exchange in a number of areas designed to encourage access to each other's markets.