Aug. 17 (Bloomberg) -- Borse Dubai, owner of the emirate's two stock exchanges, offered 27.7 billion kronor ($3.96 billion) for Sweden's OMX AB, topping a bid from Nasdaq Stock Market Inc.

The proposal of 230 kronor in cash, outlined in a statement by Dubai Borse today, would pay OMX investors 14 percent more than the 202.3 kronor in cash and stock Nasdaq offered in May. Dubai said today it already controls 28.4 percent of Stockholm- based OMX, the biggest Nordic exchange.

Dubai's bid threatens to foil Nasdaq's second attempt since March 2006 to expand into Europe, where it now lags behind the trans-Atlantic NYSE Euronext. Nasdaq Chief Executive Officer Robert Greifeld, who needs about $355 million to top Dubai's bid, said in a statement the New York-based exchange has the financial wherewithal to alter its offer.

``Nasdaq will have to revise their bid,'' said Michael Long, an analyst at Keefe, Bruyette & Woods, who has a ``market perform'' rating on OMX. ``They could increase the cash component of their offer or raise it. To raise could be tough, but Nasdaq could find the money.''

At least $64 billion of acquisitions and joint ventures have taken place among exchanges worldwide since 2005, data compiled by Bloomberg show. The largest was NYSE Group Inc.'s $14 billion purchase of Paris-based Euronext NV in April.

Oil Revenue

Borse Dubai hired former OMX CEO Per Larsson this month to help pursue purchases. Larsson was succeeded in 2003 by Magnus Boecker, who now must decide whether to favor his predecessor. The United Arab Emirates' government set up Borse Dubai by combining its stakes in the Dubai Financial Market and the Dubai International Financial Exchange.

Dubai has used billions of dollars of oil revenue for purchases and plans to invest in financial services to lure companies to the Gulf. Borse Dubai said the transaction would create the fifth-largest stock exchange in the world and a ``gateway'' to the Middle East, North Africa and Central and South Asia.

The exchange held ``positive and constructive'' meetings with OMX executives, Chairman Essa Kazim said on a call with journalists today. He declined to comment on whether Dubai may invite Nasdaq to join the combination.

``There are synergies but they are bigger on the growth and revenue side,'' Kazim said. ``We have been working on this plan for a long time. It was the right time to bid.''

OMX said in a statement it will consider the Dubai offer. Nasdaq today urged OMX shareholders to shun the ``inferior'' rival bid.

Wallenberg Family

OMX rose 3 kronor to 232 kronor in Stockholm, while Nasdaq gained $2.10, or 7.1 percent, to $31.75 at 4 p.m. in New York. Nasdaq shares have tended to gain when the chances of a successful OMX deal diminish, said Fox-Pitt, Kelton Inc. analyst Ed Ditmire in a note to clients today.

Investor AB, the holding company of Wallenberg family and OMX's largest shareholder, said it isn't convinced the higher cash offer from Borse Dubai is superior. Investor holds a 10.7 percent stake in OMX.

``We see a significant industrial logic in a trans-Atlantic combination between OMX and Nasdaq with synergies and development opportunities,'' Investor spokesman Fredrik Lindgren said in an interview today in Stockholm. ``It is therefore not obvious that a cash offer at this level is more attractive than Nasdaq's combined cash-and-share offer.''

Government Stake Sale

The Swedish state, which is the second-largest shareholder with a 6.6 percent, will evaluate the proposed deal, Financial Markets Minister Mats Odell said in an e-mailed statement today.

Nordea Bank AB, which owns 5.5 percent of OMX and had accepted Nasdaq's bid, will also examine the Dubai offer. ``We're very interested in the future of OMX as we are a client of theirs and one of the owners,'' spokesman Boo Ehlin said.

Nasdaq CEO Robert Greifeld in February abandoned a yearlong quest to buy London Stock Exchange Plc, Europe's biggest bourse, and settled on OMX to add stock and derivatives trading and enter the market for software to run exchanges. Together, OMX and Nasdaq would handle a combined $60 billion in shares a day compared with $126 billion for NYSE Euronext.

``Nasdaq right now is in a corner; it really needs to do something on the international front,'' said Cubillas Ding, a senior analyst in London for consulting firm Celent LLC. ``Nasdaq needs to go back to investors and paint a more detailed picture of what the combined entity will be like. If they're going to compete only on price, I don't think they're going to win, considering Dubai has deep pockets.''

`Other Approaches'

In May, Nasdaq agreed to pay 94.3 kronor a share in cash, and issue 0.502 of its shares for each OMX share. The value of Nasdaq's offer has declined since it was first announced because of a 3.3 percent drop in its share price.

``We remain in close dialogue with the management team and board of directors at OMX,'' Greifeld said in a statement. Nasdaq is ``committed to structural flexibility and have the financial wherewithal to consider other approaches.''

OMX CEO Boecker had previously said he supports a combination with Nasdaq. He would stand to become president of the combined company, moving to New York from Stockholm.

Boecker has said he's uneasy about a takeover of the Nordic exchange by Borse Dubai as he's concerned about the regulation and transparency of a market belonging to one shareholder.

To contact the reporter on this story: Nandini Sukumar in London at nsukumar@bloomberg.net.

Last Updated: August 17, 2007 17:06 EDT