Nasdaq CFO discusses idea of exchange being private vs public

Wed Feb 13, 2013 6:19pm EST

Feb 13 (Reuters) - Nasdaq OMX Group would not gain any advantages by becoming a private company, and the exchange operator does not want to be highly leveraged, Chief Financial Officer Lee Shavel said on Wednesday, but he did not dismiss the idea outright.

Private equity firm Carlyle Group recently approached Nasdaq about taking the exchange operator private, but the talks fell apart over a disagreement on price, sources familiar with the deal said on Monday.

Nasdaq can not comment on "rumors or speculation," Shavel said at the Credit Suisse Financial Services Forum in Miami. But speaking hypothetically, he said Nasdaq believes there is plenty of value in the company to be unlocked, and that others likely see that as well.

"We would be disappointed if the private equity community didn't from time to time see an opportunity in us as an undervalued company and express interest," he said.

For a time, Nasdaq was a private company, and counted PE firms Silver Lake and Hellman & Friedman as investors, Shavel pointed out.

Nasdaq shares began trading on the OTC Bulletin Board in 2002 not long after being spun out of what is now the Financial Industry Regulatory Authority (FINRA). Its shares were listed on the Nasdaq Stock Market in 2005 following a offering of secondary shares.

Shavel took aim at some reports that questioned the idea of exchanges with listing businesses going private, given that they regularly sing the virtues of the public market.

"We would never presume to say to a company that their decision to be public or private should be driven by whatever Nasdaq chooses to do in their own unique circumstances," he said.

He also said Nasdaq has strong, stable cash flows, which could be leveraged if necessary. PE firms regularly do leveraged buyouts, using the cash flows of the target firm to secure and repay the debt.

The average amount of leverage that PE firms generally add to target firms is similar to the amount of leverage Nasdaq had when it was private, and regulators would not likely have a problem if it had a similar level again, Shavel said.

But Nasdaq does not think leveraging up would generate substantial value for its shareholders at this point, he added.

And even if going private were an option, it might not be the best one at this point.

"It doesn't open up any additional doors to us that aren't available to us as a public company," Shavel said.

Questions of Nasdaq possibly seeking a strategic partner surfaced after rival NYSE Euronext announced in December it was being bought by IntercontinentalExchange Inc in a cash and stock deal valued at $8.2 billion.

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