Qatar to be LSE's biggest investor

A deal that will make Qatar the largest shareholder in the London Stock Exchange moved closer to completion yesterday as talks advanced with Dubai, the bourse's biggest investor.

Under a deal being hammered out between the sovereign wealth funds of the rival emirates, Dubai has agreed to trade about 5 per cent of its holding in the LSE in exchange for Qatar's 9.98 per cent stake in OMX, the Nordic exchange group Dubai is taking over.

Currently, Borse Dubai, the fledgling exchange group, owns 20 per cent of the LSE, while the Qatar Investment Authority owns 15 per cent, making them the number one and the number two shareholders in the bourse. Assuming the deal is agreed, they will swap rankings on the register, leaving the QIA with 20 per cent, and Dubai with 15 per cent.

Representatives of the emirates have been locked in talks since September, when Borse Dubai bought a 28 per cent stake in the LSE from Nasdaq, the American exchange. The move infuriated the Qataris, who also had been in talks with Nasdaq and were presumed the favourites. In conjunction with taking the LSE stake, Dubai also announced the acquisition of OMX and a planned stake purchase in Nasdaq.

Reacting to the surprise moves, Qatar bought the OMX and LSE stakes, potentially complicating Dubai's overarching plan to build the premier financial exchange in the Middle East by using OMX technology and the Nasdaq brand.

Yesterday, the QIA informed the Swedish Financial Services Authority that it had decided to rescind a previous application to increase its stake in OMX beyond its 9.98 per cent stake, indicating an agreement between the two sides was near. Dubai may sell its LSE stake once its tie-ups with OMX and Nasdaq go through.