Business Context and Reporting Period
This Form 8-K, filed on March 3, 2008, reports material events for The NASDAQ OMX Group, Inc. (formerly The NASDAQ Stock Market, Inc.) occurring primarily on February 26 and 27, 2008. The filing details the consummation of the company's combination with OMX AB (publ) ("OMX"), the entry into significant financing agreements, and the issuance of equity and debt securities.
Key Financial Metrics and Transactions
- Acquisition Consideration: Nasdaq acquired approximately 97% of OMX (117,227,931 shares) for SEK 11,678,630,352 and 60,561,515 shares of Nasdaq Common Stock.
- Debt Issuance: Nasdaq completed a private placement of $425 million in 2.50% Convertible Senior Notes due 2013. An additional $50 million was added via an over-allotment option, totaling $475 million.
- Debt Financing: Nasdaq entered a Credit Agreement providing up to $2,075 million in senior secured loans. This includes a $2,000 million Term Loan Facility (with $625 million drawn immediately for the OMX acquisition) and a $75 million Revolving Credit Facility.
- Equity Issuance: 60,561,515 shares of Nasdaq Common Stock were issued to Borse Dubai as partial consideration for the OMX acquisition. 17,660,367 of these shares were deposited into a trust.
- Ownership Structure: Borse Dubai acquired 19.99% of Nasdaq Common Stock on a fully-diluted basis.
Material Changes and Agreements
The filing outlines several material definitive agreements and structural changes:
- OMX Transaction: Completion of the acquisition of OMX from Borse Dubai, creating The NASDAQ OMX Group.
- Stockholders' Agreement: Borse Dubai is restricted from transferring its Nasdaq shares for one year and is subject to a standstill agreement preventing it from acquiring more than 19.99% of Nasdaq stock or seeking control for 10 years, unless specific conditions are met.
- Board Representation: Borse Dubai is entitled to nominate two directors to the Nasdaq Board as long as it maintains at least half of its initial 19.99% ownership.
- Convertible Notes: The 2.50% Notes are convertible at an initial rate of 18.1386 shares per $1,000 principal amount (approx. $55.13 conversion price). Nasdaq cannot redeem these notes prior to maturity.
- Credit Covenants: The new Credit Agreement includes financial covenants requiring a minimum interest expense coverage ratio and a maximum total leverage ratio, along with restrictions on dividends, mergers, and additional debt.
Management Commentary, Risks, and Unusual Items
- Executive Appointment: Magnus Böcker, former President and CEO of OMX, was appointed President of Nasdaq effective February 27, 2008. His 2008 compensation package includes a $750,000 base salary, a $1,000,000 target bonus, and a $2,500,000 equity award.
- Future Acquisitions: The Credit Agreement includes delayed draw term loans allocated for the contemplated acquisition of the Philadelphia Stock Exchange (PHLX) and assets of Nord Pool ASA.
- Registration Rights: Borse Dubai and the Trust have demand and piggyback registration rights for the Nasdaq shares they hold, subject to minimum value thresholds ($50 million) and timing restrictions.
- Financial Statement Filing: Required financial statements for the acquired business (OMX) and pro forma financial information are not included in this filing but will be submitted within 71 days.
Investor Verification Checklist
- Verify the final exchange rate used to convert the SEK 11.68 billion cash portion of the OMX acquisition into USD for financial statement impact.
- Confirm the specific terms of the "floor price" ($51.52) for the Borse Dubai Nasdaq Share Trust and the conditions under which the Trust must dispose of shares.
- Review the detailed financial covenants (leverage and coverage ratios) in the Credit Agreement to assess refinancing risk.
- Monitor the status of the delayed draw term loans for the PHLX and Nord Pool acquisitions to determine if these transactions proceed.
- Check the upcoming 71-day filing for pro forma financial information to understand the combined entity's projected financial position.