Borse Dubai has no plans to sell its stake in the London Stock Exchange Group and does not rule out increasing it, its chairman told Reuters in an interview. Borse Dubai, which is wholly owned by the government of Dubai, holds a 21 percent stake in the LSE Group, making it the largest single shareholder, having acquired its holding as part of a complex three-way deal with Nasdaq and Europe's OMX group.
"It's a strategic investment and we will keep it as long as we feel we need to keep it," Essa Kazim said on Sunday, adding there were no current plans to sell. Asked if Borse Dubai was considering raising its stake in the LSE, Kazim said: "All options are on the table."
The Nasdaq OMX-Borse Dubai deal was completed in February, 2008, with Borse Dubai taking a 19.99 percent share of the newly created Nasdaq OMX Group and receiving Nasdaq's 28 percent stake in the LSE. The latter was diluted following LSE's subsequent merger with Borsa Italiana, while Nasdaq OMX has a 33 percent share of the rebranded Nasdaq Dubai, with Borse Dubai owning the remainder.
The deal cost Borse Dubai, which also owns 80 percent of the Dubai Financial Market, $4.9 billion and was finalised before the financial crisis struck, but Kazim denied he overpaid. LSE shares closed at 739.5 pence on Friday, making Borse Dubai's LSE stake worth 416.5 million pounds ($687.4 million).
"We truly believe stock exchanges will be back again to the right value, if you look across the financial sectors, the least impacted were the stock exchanges," said Kazim. "The LSE stock price has doubled in a very short time. Longer term, exchanges will be in a much stronger position to recover their value than any other entities." But analysts have said the outlook for Britain's largest stockmarket, which swung to a 250 million pound loss last year, remains very challenging.
As well as being hit by deteriorating economic conditions, the exchange is also locked in a fierce battle for business with new low-cost entrants such as Chi-X and Turquoise. In February, Borse Dubai signed a $2.5 billion medium-term loan facility to help refinance a $3.8 billion loan used to fund the Nasdaq OMX deal, with the state-owned Investment Corporation of Dubai (ICD) also providing a $1 billion equity injection.
This allayed fears that Borse Dubai would struggle to refinance its debts, amid a sharp slowdown in Dubai's economy. The Qatar Investment Authority, a Qatar sovereign wealth fund, also has a 15 percent stake in the LSE, but Kazim said Dubai had no dialogue with Qatar over their respective holdings. "We never to talk to them (Qatar) about our strategy as far as our stake in London is concerned," added Kazim.
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