Dubai Agrees To Acquire 20% Stake in Nasdaq Market

By Thursday, a flurry of lobbying was taking place on Capitol Hill. Nasdaq representatives briefed congressional staff members Wednesday night about the deal while Nasdaq's president, Robert Greifeld, made some calls. Among the law firms talking to lawmakers about the transaction are Akin Gump Strauss Hauer and Skadden, Arps, Slate.

In an interview Thursday, Greifeld said the deal includes safeguards that should address some lawmakers' concerns. Nasdaq's corporate charter, he said, limits the voting rights of any shareholder, no matter how large its stake, to 5 percent. The proposal, which gives the Dubai exchange two of Nasdaq's 16 board seats, also prevents Dubai from increasing its stake for 10 years.

Greifeld also said, the deal would be voluntarily submitted to review by the Committee on Foreign Investment in the United States, an interagency committee of the federal agency.

"We have lined up what we need to do and we're going to carry through with it," Greifeld said.

Several observers said that the Nasdaq deal has a better chance of succeeding than the failed bid for management of key U.S. ports. Dubai's stake in Nasdaq would be a minority stake, they said, albeit a significant one.

"They're not going to be able to control the franchise," Steil said. "From Dubai's perspective, their main purpose is to buy credibility from abroad."

Despite the notes of caution, most politicians maintained a neutral stance on the deal, saying they would await the result of the federal review.

Among the supporters was New York Mayor Michael R. Bloomberg (I). The transaction, he said in a statement, "appears to be good news for both New York and the nation, especially because it gives our City a significant leg-up on our competitors in Europe."

"Of course, like all such deals, this one should undergo all the appropriate scrutiny -- but I hope that that discussion does not devolve in the kinds of demagogic attacks that could cost Americans jobs and threaten New York's place as the financial capital of the world," he said.

The world's biggest stock exchanges have transformed themselves in recent years, converting from club-like groups serving a handful of seat holders into publicly traded companies responsive to their own shareholders' needs. Driven by a profit motive, these exchanges are now jostling to gain a competitive edge.

The Nasdaq deal is part of a broader deal under which the Dubai exchange would also take a 28 percent stake in the London Stock Exchange and Nasdaq would control the OMX, a stock exchange based in Stockholm. Dubai is getting the London Stock Exchange shares from Nasdaq, which had accumulated the shares in a failed effort to buy the premier British exchange.

The three-way deal gives Nasdaq's Greifeld what he has long desired, an exchange with a global footprint, while giving the fledgling Dubai Borse an edge in its efforts to become a financial center. It also brings to an end a month-long bidding war between the two exchanges over the OMX. The OMX is smaller than the Euronext exchange, which merged with NYSE Group, Nasdaq's rival. The OMX is considered a global leader in trading technology.

The approach of seeking substantial minority shares, rather than whole firms, would likely serve foreign governments well as an increasing number set up sovereign-wealth funds, use to help manage national savings, some analysts said.

Taking stakes in private-equity firms adds a layer between the foreign government and U.S. companies, providing further protection against accusations of corporate takeovers of U.S. assets, said Raghuram G. Rajan, professor of finance at University of Chicago's Graduate School of Business and former economic counselor at the International Monetary Fund.

"You're basically saying, 'I'm investing in Carlyle, which is going to manage a portfolio, and there's no way I'm going to exert influence.' " he said. "You're getting the diversification without the additional baggage of concerns about government intervention."

Staff writers Thomas Heath and Jeffrey H. Birnbaum in Washington and staff researcher Richard Drezen contributed to this report.