(Corrects 10th paragraph to show Borse Dubai owns 33 percent of
Nasdaq Dubai and not 67 percent as previously reported)
* Proposal has been discussed on and off for years
* Now being looked at again as emirates seek efficiencies
* Could boost turnover, attract foreign institutions
* Aluminium merger showed emirates ready to cooperate
* Goldman Sachs has been adviser
By Stanley Carvalho, Dinesh Nair and Mirna Sleiman
ABU DHABI/DUBAI, June 17 The United Arab
Emirates has revived a proposal to merge its two main stock
exchanges in a state-backed deal that could boost trade in the
local market and attract more foreign investment to the Gulf
state, sources familiar with the plan said.
Talks on a potential merger between the Dubai Financial
Market (DFM) and the Abu Dhabi Securities Exchange
(ADX) have occurred on and off since at least 2010.
There are no common listings on the exchanges; a merger
could deepen the equity market of the Arab world's second
biggest economy, encouraging more companies to list their shares
and international institutions to buy them.
But progress toward the proposed tie-up halted because of
differences over how to value the exchanges, and because the two
emirates were preoccupied by other issues such as the aftermath
of Dubai's 2009-2010 corporate debt crisis.
In recent weeks, however, officials in Abu Dhabi and Dubai
have focused on the idea again, with the two emirates showing
willingess to consolidate some of their business interests to
compete in the global economy, the sources said.
"The entire valuation, structuring of the deal is done. It's
been an ongoing process and the decision is now pending at the
highest authorities in the two emirates," one source said.
"It's not a question of whether they would do it now. It's a
question of when," added the source, speaking on condition of
anonymity as the matter has not been made public.
Spokesmen for ADX, DFM and the Abu Dhabi government declined
to comment. A spokeswoman for the Dubai government's media
office was not immediately available for comment. UAE market
regulator Securities and Commodities Authority said it had no
information on the matter.
The sources did not provide any valuation for the deal. DFM,
which is the only listed Gulf stock exchange, has a market value
of $4.4 billion; its stock price has nearly doubled this year
and risen 51 percent in the past month, as Dubai's recovery from
its debt crisis has accelerated.
DFM is 80 percent owned by Borse Dubai, a holding company
which also owns a 33 percent stake in the Nasdaq Dubai bourse,
as well as nearly 21 percent of the London Stock Exchange
, according to its website. Nasdaq Dubai is unlikely to
be part of any merger, one source said.
Abu Dhabi and Dubai compete in many ways; they have rival
airlines, and Abu Dhabi this year announced plans to develop an
international financial centre that could eventually take
business from Dubai in some areas.
But the emirates have also cooperated, and Abu Dhabi bailed
out Dubai with a $10 billion loan during its crisis. Early this
month, Dubai and Abu Dhabi decided to merge their state
aluminium producers to create an entity with a combined
enterprise value of $15 billion.
A second source said the merged exchange was likely to be
owned 45 percent each by the Abu Dhabi and Dubai governments,
and would most likely be called Emirates Bourse, with trading
floors in both cities.
The remaining 10 percent would be owned by minority
shareholders, the source said, adding that the merger would
involve the transfer of an undisclosed sum from Abu Dhabi to
Companies listed on DFM, which include developer Emaar
Properties and lender Emirates NBD, have a
combined market capitalisation of about $47 billion. Stocks on
the Abu Dhabi exchange, home to companies such as regional
telecommunications giant Etisalat and National Bank of
Abu Dhabi, have a market value of $94 billion,
according to Thomson Reuters data.
DFM's main stock index has gained 46 percent so far
in 2013 while Abu Dhabi is up 38 percent, making these
bourses among the best-performing globally. First-half trading
volume on DFM more than doubled to 31 billion shares from 14.7
billion a year earlier.
Last week equity index compiler Morgan Stanley Capital
International decided to upgrade the UAE to emerging market from
frontier market status, which is expected to attract hundreds of
millions of dollars of institutional portfolio investment to the
"A potential merger would be a major move for regional
markets. Consolidation calls have been looming for years, and
it's high time it's implemented now," said a Dubai-based fund
Goldman Sachs Inc was hired by both Dubai and Abu
Dhabi to advise on the possible merger in 2010. The U.S. bank
has retained the mandate and has been involved in the valuation
process, two of the sources said.
(Additional reporting by Nadia Saleem; Editing by Andrew