American stock exchange Nasdaq is determined to buy OMX, even after rival Borse Dubai has built a potential 27.4 per cent stake in the Scandinavian stock exchange group. Nasdaq had offered $3.7 billion (£1.82 billion, €2.7 billion) in cash and shares for OMX, but will now have to raise its offer in the light of the Dubai-based exchange's counterbid. (See: Nasdaq agrees to buy Sweden's OMX for $3.7 billion)

While Nasdaq's current offer values OMX shares at 208.1 kroner ($30.75) each, Borse Dubai is offering 230 kroner ($34.26) a share, but through a complex put option. Borse Dubai yesterday confirmed it had bought 4.9 per cent of OMX shares outright, and had options for a further 22.5 per cent, all through a book building process with some unnamed investors, taking its total potential stake to 27.4 per cent.

Per Larsson, chief executive of state-owned Borse Dubai and himself a former OMX CEO, plans to travel to Sweden next week to try to convince OMX shareholders, management and other stakeholders to agree to a tie-up. He also plans to meet the Swedish government, indicating that the Dubai company will not back off from a takeover battle with Nasdaq. Dubai argues that the 230 kroner a share it paid for OMX shares in the market represents a better offer for OMX than the US company is offering.

But a spokesman for the American exchange said: "The value of our offer is a superior proposition for the shareholders. That being said, we would be flexible with regard to the structure of our offer. We certainly have the financial wherewithal to consider other alternatives."

OMX operates stock exchanges at Copenhagen in Denmark, Stockholm in Sweden, Helsinki in Finland, Reykjavik in Iceland, Riga in Latvia, Tallinn in Estonia, and Vilnius in Lithuania. OMX shares shot up by 6.7 per cent on 9 August to close at 231kroner after Nasdaq said it was "fully committed" to its offer. The price is higher than both rival offers, indicating that a bidding war is on the cards.

Analysts expect Nasdaq to come back with a higher offer, as the New York-based bourse is keen to expand into Europe and has been thwarted before. In all probability, it has learned from its abortive bid for the London Stock Exchange (LSE) about the danger of putting in its final offer too early.

Others felt that the inclusion of Nasdaq stock in the bid could sway some investors to stick with American bid, despite its being lower. Borse Dubai's approach marks the first time that a non-European or US exchange operator has bid to take part in the industry's two-year-old consolidation process. Exchange operators have sealed more than $60 billion in deals since 2005, driven by the lure of economies of scale, especially a reduction in the per-transaction cost of their expensive IT platforms.

Borse Dubai was incorporated recently, as a holding company for the twin operations of the Dubai Financial Market and Dubai International Financial Exchange (DIFC). Majority-owned by the Dubai government, it has said in the past that it would like to expand its market operations beyond the Middle East.

However, OMX chief executive Magnus Bocker is unimpressed by the Dubai bid and feels that a deal with Nasdaq is best for his group. "The next best is that we continue independently," he said. The OMX board agreed to back Nasdaq's bid in May; the deal would create the world's second-largest stock exchange operator. The proposed 'Nasdaq OMX Group' would have about $5.5 trillion of listed assets, a distant second to NYSE Euronext, which has about $25.8 trillion. Shareholders representing about 16.6 per cent of OMX stock have already agreed to accept Nasdaq's offer.