December 20, 2010


Justin Schack


Joe Gawronski

President and COO

Rosenblatt Securities Inc.
New York +1 212 607 3100
Dublin +353 1 855 9125

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Nasdaq OMX Rallies After Buying Stock From Borse Dubai
—Bloomberg News

Nasdaq OMX Group… rallied to the highest price since March 2009 after agreeing to repurchase 22.8 million of its shares from Borse Dubai Ltd. for about $497 million. Nasdaq will pay $21.82 per share, or 3.2 percent less than the closing price yesterday, and fund the purchases by raising $370 million through a debt offering… The repurchase means the company has bought back $797 million since March and exhausted its approved buyback plan, Chief Financial Officer Adena Friedman said in an interview today.

Our Take: The impact of the large buyback on earnings rightfully is giving the company a short-term boost. But the longer-term impact of the Borse Dubai deal could be less positive. First, consider that taking a significant portion of the Borse Dubai stake out of play makes a hostile takeover of NDAQ at a premium price less likely. Secondly, exhausting the entire buyback program removes the steady, gradual support of open-market repurchases. Lastly, we disagree with the view expressed by some observers that NDAQ’s additional debt and recent FTEN buy (see separate item below) are positives because they should prevent the company from making further acquisitions. We’ve long believed that NDAQ’s best value-creation prospects would come from another sizeable acquisition rather than organic growth initiatives. The company has proven itself without peer at acquiring and synergizing, but has a less successful track record with generating growth from within. This deal may give NDAQ less flexibility to make further acquisitions, removing that potential catalyst. 

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