Dubai Agrees To Acquire 20% Stake in Nasdaq Market
Friday, September 21, 2007
NEW YORK, Sept. 20 -- Middle Eastern governments announced a series of billion-dollar deals Thursday that would give them stakes in financial institutions at the heart of Western capitalism, raising concerns in Washington about sensitive foreign investments.
Under a complex three-way deal, the stock exchange owned by the government of Dubai would acquire a 19.9 percent stake in the Nasdaq Stock Market, becoming the first government in the Middle East to own a substantial interest in a U.S. exchange.
Separately, Carlyle Group of the District said it was selling a 7.5 percent share of its general ownership to an investment group owned by the government of Abu Dhabi, which like Dubai is part of the oil-rich United Arab Emirates. The Qatar Investment Authority, a government investment fund, said it bought a 20 percent stake in the London Stock Exchange.
The transactions are the latest examples of governments of emerging economies, rich in natural resources and with healthy foreign-exchange reserves, buying shares of some of the biggest names in business. In May, as the private-equity firm Blackstone Group took itself public, the Chinese government paid $3 billion to buy a 9.7 percent stake in the IPO.
The governments seek to diversify out of their concentrated foreign investments in U.S. government bonds into higher-yielding assets.
"They're swimming in cash," said Benn Steil, director of international economics at the Council on Foreign Relations. "They're looking for things to do with it."
The foreign investments have been followed closely by lawmakers, some of whom expressed uneasiness Thursday over the Nasdaq proposal.
Sen. Charles E. Schumer (D-N.Y.), who heads the congressional Joint Economic Committee, called on Treasury Secretary Henry M. Paulson Jr. to investigate the deal.
"At this early stage this deal gives me pause," Schumer said in a statement. "While I am and have been a big proponent of foreign investment in the United States, we must still be careful of the kinds of investments made in our critical infrastructure, financial exchanges, utilities, and other areas that are vital to the operation and security of our country."
Schumer said the Dubai exchange "is majority owned and controlled by the government of Dubai, which has previously been cited as a nexus of terror financing, money laundering, and a potential crossroads for shipping and trading for Iran in their quest for nuclear materials and technology."
The lawmakers and Dubai investors recalled the attempt by Dubai Ports World to take operating control of terminal operations at several major U.S. seaports last year. The proposal set off a political backlash among critics who did not want to put any part of U.S. border security in the hands of an Arab government. The company eventually abandoned the plan.
In July, President Bush enacted legislation seeking to ensure high-level scrutiny of direct foreign investments in U.S. assets that are critical to national security.