Stock market operator Nasdaq and Borse Dubai joined forces on Thursday with a deal allowing Nasdaq to buy Nordic markets operator OMX and create "a global financial marketplace" which also sees Borse Dubai take key stakes in both the London Stock Exchange and Nasdaq.
But Qatar's state investment fund, the Qatar Investment Authority, promptly responded by buying a 20% stake in the London Stock Exchange and urged OMX shareholders to take no action on the Borse Dubai/Nasdaq offer pending a further statement.
Under the Nasdaq deal Borse Dubai will end up with a 20% stake in Nasdaq and Nasdaq will take a 33% stake in the Dubai International Financial Exchange (DIFX), to be renamed Nasdaq DIFX. The deal allows Dubai to use this name in the Middle East, North Africa and South Asia.
"The combination will create the largest global network of exchanges and exchange customers linked by technology," Nasdaq's president and chief executive, Bob Greifeld, said.
Nasdaq said it will ultimately take over OMX, while Borse Dubai has bought from Nasdaq a 28% stake in the London Stock Exchange for 14.14 pounds ($28.28) a share, leaving Nasdaq with 3.5% of the London market operator.
Borse Dubai has agreed to continue with its 230 Swedish crown per share all-cash offer for OMX, which values OMX at around $4 billion, and to then sell OMX on to Nasdaq, which is to drop its own $3.7 billion cash-and-shares bid for OMX.
Qatar has not until now featured in the bid battle for OMX but had been reported to be close to buying Nasdaq's 31.5% stake in the London Stock Exchange (LSE).
LSE shares were up 10% at 15.97 pounds to value the world's third-largest share market by trading volume at around 3.2 billion pounds ($6.4 billion).
The QIA did not disclose the source of its 20% stake in LSE and said it would not make a full takeover offer, "but reserves its position in the event that a third party announces a firm intention to make an offer."
The LSE said it welcomed the QIA as a long-term investor and that given the development of Doha as a financial centre, the shareholding presented significant opportunities.
Borse Dubai chairman, Essa Kazim, also hailed its LSE purchase as a long-term investment.
"Our investment in the London Stock Exchange is purely a financial investment. We believe in London as a global financial centre, it has great potential to continue to be that way," Kazim told a news conference.
"Our strategy never changed ... its about growth and we now have the best of both worlds. We have now the technology of OMX and we have the technology of Nasdaq. We also have both brands."
Long a takeover target, the LSE rejected Nasdaq's advances for the second time earlier this year, causing the world's second biggest share market operator behind the NYSE Euronext to turn its attentions to the OMX instead, only to be met by a counter bid for the Nordic firm from Borse Dubai.
"When we reflected upon the rationale behind Dubai's interest we saw that it was not in any way in conflict with our interest," Greifeld told reporters.
"Clearly the Dubai operation is about emerging markets and being able to provide leading capital market services to the emerging markets," he said.
"This (Dubai) transaction ... represents a strengthening of our U.S. market presence, a strengthening of OMX's European market presence and certainly an opportunity to do things in the emerging markets that have never been done before."
With oil and gas prices staying strong, Qatar and Dubai have become increasingly prominent investors in foreign businesses. Dubai has spent more than $15 billion in less than three years on foreign acquisitions, including $6.8 billion on taking over British ports operator P&O and $1 billion on a stake in DaimlerChrysler and Standard Chartered.
Meanwhile the Qatari-backed Delta Two investment fund is currently seeking to take over British supermarkets group J. Sainsbury for 10.6 billion pounds.
Unlike Qatar, Dubai is not a major oil or gas producer but has still benefitted from a quadrupling of oil prices since the start of 2002, attracting investment from its neighbours in its property and tourism industries and fuelling the ambitious economic expansion plans of its ruler, Mohammed bin Rashid al-Maktoum.
Borse Dubai is a holding company for the Dubai government's stakes in Dubai Financial Market and the Dubai International Financial Exchange (DIFX).
OMX, in addition to owning and running exchanges in Sweden, Denmark, Finland, Iceland and the Baltic states, provides technology to about 60 exchanges worldwide, including the Australian Securities Exchange, Nordic power market Nordpool and the Singapore Exchange.