U.S. electronic stock market Nasdaq has agreed to buy Nordic markets owner OMX for $3.7 billion, as Nasdaq seeks to expand abroad following a series of rival stock market mergers.

The move, announced on Friday, comes after Nasdaq's bid for the London Stock Exchange was rejected in February and as rivals have pushed ahead with their own mergers.

"This combination provides our organizations with the ability to grow and accelerate the global flow of equity capital," said Nasdaq's chief executive, Robert Greifeld, who will be chief executive of Nasdaq OMX Group.

The deal brings together the largest electronic stock market in the United States and the owner of the share markets in Stockholm, Helsinki, Copenhagen, Iceland and the Baltic states as well as OMX's market technology business, which accounts for over a third of its annual turnover.

In a bid backed by the board of OMX and major shareholders in both companies, Nasdaq is offering 0.502 new Nasdaq shares and 94.3 Swedish crowns ($13.79) in cash for each OMX share.

The companies said that based on Nasdaq's May 23 closing price, the offer valued OMX at 208.1 crowns per share, or 25.1 billion crowns ($3.67 billion).

The Swedish government, which owns 6.6 percent of OMX but has the company on its privatization list, said it would take a look at the deal before deciding on its stance.

No pronouncement on the offer would come before parliament deliberations on privatization on June 20, it added

OMX shares, suspended on Thursday, leapt and were up 11.67 percent at 201 crowns by 1216 GMT on Friday.

CROSS-BORDER CONSOLIDATION

Nasdaq is already the second largest share market in the world behind the NYSE, last year trading shares worth $11.8 trillion versus the NYSE's $21.8 trillion, according to World Federation of Exchanges data.

OMX ranks 11th with a market turnover of $1.3 trillion.

Industry consolidation has come amid new financial market liberalization rules coming in later this year in Europe and investor demands for cheaper trading and bigger markets.

A new threat in Europe has come from investment banks, which plan to form their own European share trading platform.

OMX is also attractive to Nasdaq as it is a world-leading provider of exchange technology and has shown it can successfully integrate markets across borders. It has also taken first steps to expand into eastern Europe.

The companies said they would together be in a prime position to drive organic growth and take a proactive role in sector consolidation.

"We certainly expect to participate in the global consolidation in the years to come," Greifeld said of Nasdaq's role during a conference call after announcing the deal.

This consolidation has already seen the New York Stock Exchange merge with Paris-based Euronext as NYSE Euronext, while Deutsche Boerse is to buy New York-based International Securities Exchange.

The companies said they had acceptances worth 16.6 percent of OMX from shareholders including the Wallenberg family's Investor AB and OMX chief executive Magnus Bocker.

SYNERGIES

Bocker declined to say if OMX had talked with other buyers, though the London Stock Exchange has been reported by media to be eyeing OMX, which made an abortive bid for the LSE in 2000.

"As you know, everyone in this industry knows everyone else pretty well," Bocker told Reuters.

Greifeld was also tight-lipped. "Today is a day of Nasdaq and OMX. We are not talking about the LSE," he told Reuters.

The companies expected total pretax annual synergy benefits of $150 million, including $100 million of cost synergies and $50 million of revenue synergies.

Nasdaq shares fell more than 6 percent but later pared losses in electronic trade before Friday's U.S. opening. They were suspended on Thursday at $33.98, valuing the bid at about 211 crowns, according to a Reuters calculation using current exchange rates.

Nasdaq shareholders will own around 72 percent of the new company, the statement said, and the new group will have a combined market capitalization of around $7.1 billion.