Sneaky Tactics May Win an M&A Battle, But Lose the War

(Bloomberg Opinion) -- In M&A, sneaky tactics can win battles, but not necessarily the war. Being sly has given Euronext NV an apparent lead over Nasdaq Inc. in the battle for control of Norway’s main stock exchange. Turning tactical advantage into victory won’t be easy.

Euronext went behind Oslo Bors VPS Holding ASA’s back and agreed an offer directly with a group of shareholders back in December. The Amsterdam-based exchange didn’t initiate this process, but it was content to play along when investors holding 21 percent of the Norwegian exchange quietly put their stake on the market in the hope of encouraging a takeover.

A price of 145 Norwegian kroner ($16.86) a share was agreed. By Dec. 22, Euronext had secured sale commitments from holders of 45 percent of OBVH’s stock and told the company. The day after, it informed the Norwegian authorities. Then it made the offer available to all investors. By the new year, Euronext had shares or acceptances covering than half the company, giving it control subject to regulatory approval.

Cornered, OBVH’s board began a sale process of its own. Enter Nasdaq, the knight in shining armor. It trotted politely up to the front gates with a 152 kroner-a-share bid and warm words about supporting the Nordic region’s capital markets. 

At $763 million, the U.S. bidder has the highest offer, the backing of the board and support from shareholders with 35 percent of the company – including the two top holders, DNB Livsforsikring ASA and Kommunal Landspensjonskasse. But so long as Euronext has shares and commitments covering a majority of the stock, Nasdaq’s path to control is either uncertain or expensive. 

For the U.S. exchange to prevail, one of three things need to happen. First, regulators would have to block Euronext, but clear Nasdaq. Or, if both bids got clearance, Nasdaq would have to up its price to the level where Euronext changed its mind and decided to sell. Failing that, the shareholders backing Euronext would have to find a way of wriggling out of their irrevocable commitments and back the rival higher offer.

It’s not immediately obvious why either buyer would receive clearance while the other got blocked. Both are competent exchange operators. The weak spot is that supervisors may insist that any sale of OBVH must be total, leaving the company with no blocking minorities. The shareholders backing Euronext probably don’t mind who they sell to and just want out. But continued opposition from DNB and Kommunal might thwart Euronext’s effort to get clearance.

So while Euronext has majority support, it may still need to up its price and make warmer overtures to the board to enlist support in helping to secure clearance.

It’s still too soon to say whether Nasdaq will be rewarded for going through the front door. It may end up being used as leverage over Euronext, or paying more than it would had it participated in the initial closed auction. But it can probably afford to let price discipline take a back seat to friendly relations with the target and regulators.

This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.

Chris Hughes is a Bloomberg Opinion columnist covering deals. He previously worked for Reuters Breakingviews, as well as the Financial Times and the Independent newspaper.

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