If the merger of the Toronto and London stock exchanges goes through, the largest shareholder of the new entity won't be a Canadian or a Brit. It will be Sheik Mohammed bin Rashid Al Maktoum, the billionaire ruler of Dubai who loves racehorses and giant yachts and once dreamed of turning his tiny emirate into a world financial centre.
Sheik Mohammed is already the largest shareholder of the London Stock Exchange, indirectly owning roughly 21 per cent through a private holding company. He also indirectly owns 15 per cent of the Nasdaq OMX, the second largest stock market in the United States, and controls Dubai's two stock exchanges. If the merger of the TMX Group and LSE is approved, Sheik Mohammed will end up with an 11.3-per-cent interest in the combined exchange, the largest single holding.
Sheik Mohammed, 61, is perhaps best known for owning the world's largest yacht, a 532-foot vessel worth $300-million (U.S.), as well as the world's tallest building, a 160-floor skyscraper that opened in Dubai last year. But he is also a hands-on leader who has been trying for years to broaden the economic base of the emirate, one of seven that make up the United Arab Emirates federation.
He became Dubai's ruler in 2006, after the death of his brother, and promptly launched the Dubai Strategic Plan 2015, an ambitious program to wean the country off its depleting oil reserves. A key part of the plan was the creation of Borse Dubai, a joint venture between the Sheik's private company and a government investment fund. The idea was to use Borse Dubai as a vehicle to turn the desert realm into a financial centre on par with New York and London.
Within weeks of its creation in August, 2007, Borse Dubai went on a buying binge, spending $4.9-billion to acquire the 21-per-cent stake in the LSE as well as a 31-per-cent position in Nasdaq. It also took control of the Dubai exchanges and announced plans for many more acquisitions. "We aim to become one of the top three exchange groups in the world," a company spokesman said at the time.
The dream quickly faded with the onslaught of the global financial meltdown in 2008. The crisis hit Dubai hard, sending real estate values plummeting and leaving the country's major conglomerate, Dubai World, facing the prospect of defaulting on more than $20-billion in loans.
Borse Dubai didn't fare much better. The value of its holding in the LSE fell by half, trading and listings on the Dubai stock markets dried up and expansion plans were shelved. Last December, the company sold roughly half its position in Nasdaq at a steep loss, raising $672-million that will go toward paying down Dubai's $100-billion debt. It has also fended off rumours that fellow UAE emirate Abu Dhabi plans to buy the company and consolidate the federation's exchanges under Abu Dhabi's hands.
The TMX-LSE merger could breathe new life into Borse Dubai. One of the selling points of the merger is that the new exchange will dominate listings for mining and energy companies, something still relevant to the oil-rich Gulf state. And, it will give Borse Dubai the expansion it has long craved.
That's probably one reason the company endorsed the proposed merger within hours of it being announced. "Borse Dubai has always been supportive of management initiatives to create shareholder value in the London Stock Exchange," the company said in a statement. "We continue to support the management in their efforts to create both a stronger platform and a more valuable enterprise for stakeholders."