Private equity firm invests $240 m. in Nasdaq

Mark Weinraub

NEW YORK: Nasdaq on Wednesday said private equity firm Hellman & Friedman

LLC has agreed to pay $240 million for a 9.8 per cent stake, even as the No. 2

US stock market seeks to fund its ambitious agenda of international expansion

and the installation of new trading platforms.

"Hellman & Friedman's investment is an important next step in

Nasdaq's transformation into an independent, profit-driven global

exchange," Nasdaq chairman Frank Zarb said in a statement. "It will

further enhance our ability to accelerate several key initiatives which include

SuperMontage as well as alliances in Europe and Asia."

Nasdaq, which lists about 4,700 companies, is in the process of implementing

its SuperMontage trading system designed to display the best buy and sell orders

in a central location and automatically process stock trades. Under the terms of

the deal, the San Francisco-based firm will buy debentures that are convertible

into Nasdaq common stock at any time in the next five years. Although Hellman

& Friedman will own close to 10 per cent of Nasdaq, its voting rights are

capped at five per cent, Nasdaq said.

"Nasdaq's growth rates and compelling opportunities for international

expansion further underscore the underlying value we see in this

franchise," said Hellman & Friedman chairman Warren Hellman, who will

become a member of Nasdaq's board of directors as part of the deal.

Nasdaq, which earlier this week signed a deal to buy a majority stake in

pan-European bourse Easdaq, had previously raised $326 million in a private

placement of its common stock as part of its separation from the National

Association of Securities Dealers. The total cost of the Easdaq deal, including

the construction of a new trading platform for the region and related

investments, will be around $62 million.

Also this week, Nasdaq - which had been looking for European partners since a

planned deal with the London Stock Exchange and German's Neuer Markt fell apart

- formed an alliance with the London Financial Futures and Options Exchange on

individual stock futures.

Alliance talks with other bourses in Europe, like the Deutsche Boerse and

London Stock Exchange are continuing, Nasdaq said. The market, known for listing

tech heavyweights such as Microsoft Corp. and Intel Corp., must also finish the

government-mandated process of converting all of its stocks to decimals from the

traditional fractions. Nasdaq started that process in March by listing 15 stocks

in pennies to kick off its pilot program, and has said it is on schedule to meet

the decimal deadline of April 9.

(C) Reuters Limited 2001.