September 20, 2007 / 6:27 PM / 10 years ago

Gulf states buy half of London Stock Exchange

LONDON, Sept 20 (Reuters) - Qatar and Dubai are now the two biggest shareholders of the London Stock Exchange (LSE.L), holding almost half of the world's third-largest stock exchange.

Qatar Investment Authority (QIA), the investment unit of the Qatar government, has bought 20.86 percent of the London Stock Exchange (LSE), according to a regulatory document filed on Thursday.

QIA acquired 41.7 million shares at 1,585 pence each, people familiar with the matter said, representing a 12 percent premium to Borse Dubai's offer for U.S. stock market Nasdaq's (NDAQ.O) LSE stake.

Borse Dubai on Thursday agreed to buy a 28 percent stake in the LSE from Nasdaq at 1,414 pence apiece. The gulf investor is also taking a 19.99 percent stake in Nasdaq, although its voting right will be capped at five percent.

While the U.S. government is to review security issues in the Dubai investment, the LSE welcomed the QIA's move.

"The QIA has an impressive track record of making substantial long term investments in growth companies, so we are delighted to see that it recognises the Exchange's unique strategic position and excellent prospects," LSE Chief Executive Clara Furse said in a statement.

This represents a major change in shareholder base, from short-term hedge funds to long-term strategic investors.

Both QIA and Dubai said they did not plan to make an offer for the LSE. But QIA said it reserved its position if a third party were to make a bid for the U.K. exchange.

Shares in the LSE closed 9.8 percent higher at 1,595 pence each, with 124.17 million shares, or 62 percent of its share capital, changing hands.

For U.S. hedge funds Horizon Asset Management and Kinetics Asset Management, which amassed 28.4 million shares, or a 14.2 percent stake in the LSE, this means a quick profit in less than two weeks.

At 1,595 pence a share, the LSE trades at 21 times earnings ending March 2009.

By comparison, OMX OMX.ST, which found itself at the centre of a new bidding war, trades at 28.6 times prospective earnings.

Nasdaq and Borse Dubai agreed to join forces in bidding OMX shares at 230 crowns each. While QIA revealed on Thursday it had purchased a 9.98 percent stake, or 12 million shares, in Nordic exchanges operator OMX, describing it as "a key step in the QIA's ambitions to take supportive holdings in the European exchange infrastructure."

OMX shares traded at a weighted average price of 245.9 crowns each on Thursday.

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