The board of LME Holdings Ltd., the parent company of The London Metal Exchange (LME), received a cash offer of £107.60/share (or £1.388 billion ($2.2 billion)) from Hong Kong Exchanges and Clearing Ltd. (HKEx). The deal would bring together the world’s leading non-ferrous base metals exchange trading venue with the leading operator of exchanges and clearing houses in Asia. HKEx said it will preserve the LME brand with remaining a Recognized Investment Exchange in London regulated by the UK Financial Services Authority. The LME’s unique business model, including the operation of the “ring,” an open outcry trading system, daily prompt date contract structure, existing membership structure and capacity for warehousing and physical delivery, would remain intact, which contributes greatly to the LME’s position as the world’s price formation venue for non-ferrous base metals.
“The acquisition of LME Holdings represents a unique opportunity for us to acquire in one stroke a position of global leadership in the commodities market,” said Charles Li, CEO, HKEx. “This is consistent with our strategy to expand beyond equities and equity derivatives and offers significant opportunities for revenue growth. HKEx brings a unique ability to help the LME grow its business in Asia and, particularly, China and we will capitalize on this to deliver value for all our stakeholders. We are looking forward to working with the team at the LME to achieve these objectives.”
The deal would also provide a platform for significant long-term growth through the expansion of the LME’s business and operations in Asia and the Chinese market by leveraging HKEx’s resources, infrastructure and network in the region. LME would develop a clearing house, LME Clear, which will enable it to launch new products and services more efficiently drawing on HKEx’s track record and experience in operating three clearing houses. The LME would also be able to leverage HKEx’s considerable IT expertise, infrastructure and resources to enhance its current IT platform.
“This proposed combination will secure the future of the LME for its next 135 years,” said Martin Abbott, CEO, LME Holdings and the LME. “The LME’s global benchmarks plus HKEx’s pre-eminent market position in Asia, its IT and trading resources and clearing expertise will cement the LME’s position as the world’s foremost base metals trading venue.”
The transaction is expected to close during the fourth quarter of 2012, subject to FSA approval and all other relevant conditions.