The saga of Borse Dubai's campaign to gain control of the Nordic stock exchange operator OMX took another twist this month, with the Swedish Financial Supervisory Authority requesting the exchange's management answer claims it may have breached Sweden's strict financial regulations in trying to bloc the Dubai bid.
The September 4 announcement by the Swedish financial regulator was an abrupt about face from only a few days before, when it was Borse Dubai that was under scrutiny for alleged irregularities regarding its bid.
On August 17, Borse Dubai, established just 11 days earlier as a holding company for the emirate's two stock exchanges, announced it was launching a $3.97bn cash bid for OMX, in direct competition with an earlier cash and share offer made by Nasdaq of the US.
The unsolicited Dubai bid is around 13% higher than that tabled by Nasdaq, but the US offer has received support from OMX's board and major shareholders.
Helena Ostman, spokesperson for the Swedish financial authority, confirmed that OMX had been sent a "please explain" letter asking for details of its contacts with potential financial and judicial advisers to Borse Dubai.
Part of the concern was based on the fact that a senior Borse Dubai official, CEO Per Larsson, had only recently left the employ of OMX, where he had run the exchange. Swedish financial regulations require companies that are targeted for a takeover to refrain from "frustrating measures" that could influence the takeover bid outcome.
"We're investigating whether this is the case," Ostman said in an interview with an international new agency. "It's an urgent matter. Hopefully we will have something to say by the end of the week."
OMX officials have subsequently denied they had played any part in a tip-off over the Dubai bid, including suggestions of illegal share trading, which resulted in a probe by Sweden's National Economic Crime Bureau (NECB).
According to NECB prosecutor Robert Engstedt, a formal investigation was not warranted, based on the evidence of an initial probe.
"There is no cause to believe that an offence subject to a public prosecution has been committed," Engstedt said on September 4. "A preliminary investigation shall therefore not be initiated."
The announcement that it had no case to answer, combined with a ruling by the Swedish Securities Council on September 3 granting Borse Dubai an extension for its final bid submission for OMX until September 16, was welcomed by the emirati firm.
"Borse Dubai believes the additional time will enable [it] to better present its offer to OMX shareholders," the holding company said in a statement issued the same day.
The irregularity over shares centred on Borse Dubai's having acquired a 4.9% stake in OMX on August 9 and gaining options on a further 22.5% before declaring a formal bid.
Borse Dubai maintained it was not guilty of any wrongdoing as it would have to gain the approval of regulators to exercise these options and therefore had only taken a minor shareholding in OMX.
An initial investigation by the financial supervisory authority found the Dubai company had broken the law, but had moved quickly to correct the breach.
"We believe we acted in good faith and according to the rules and regulations," Larsson said in an interview on August 24. "But we acknowledge that the Swedish regulator has come out with this decision today."
Borse Dubai officials have said the proposed takeover of OMX is part of a strategy to strengthen Dubai's position as a major financial centre, as well as build the Nordic exchange into a global brand.
However, while no action will be taken against Borse Dubai, the simple fact of having been found in contravention of the rules may mean Swedish regulators could deem the Dubai operator not a fit and proper owner for OMX.
Even if it does pass the stringent requirements set by Swedish authorities, Borse Dubai will still have to convince OMX's board and shareholders of the virtues of its bid, and to stave off any counter move from Nasdaq, which has indicated it could up its own offer.
Having twice been thwarted in its attempt to gain control of the London Stock Exchange, Nasdaq has sought to expand into Europe through other avenues and may be unwilling to give up easily against the Borse Dubai bid for OMX.
