HKEx to buy LME in $2.2 billion deal
ReutersTraders and clerks react on the floor of the London Metal Exchange in the City of London.
HONG KONG (MarketWatch) -- Hong Kong Exchanges & Clearing Ltd., operator of the Stock Exchange of Hong Kong, said Friday it has been approved as the preferred bidder for the London Metal Exchange, a tie up that bolsters its reach and better positions the combined entity to tap China's growing appetite for commodities.
Under a framework agreement announced after the close of Friday trade, HKEx said it will offer 107.60 pounds (GBPUSD) for each ordinary share of LMEH, the parent company that controls the London Metal Exchange. The deal, which is subject to approval from 75% of shareholders and the U.K.'s Financial Services Authority, values the company at 1.39 billion pounds ($2.2 billion).
The HKEx said in a statement the acquisition would bring together a leading exchange in Asia and the world's biggest market for base metal contracts.
The HKEx's Chief Executive Charles Li said in a statement the deal "...represents a unique opportunity for us to acquire in one stroke a position of global leadership in the commodities market."
In press materials, the HKEx also emphasized the LME's "global network" of affiliated warehouses for physical delivery commodities, spanning the U.S., Europe and Asia.
London Metal Exchange's Chief Executive Martin Abbott also highlighted prospects for growth in Asia as among benefits arising from the deal.
"The LME's global benchmarks plus Hong Kong Exchanges' 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," Abbott said in a statement.
Hong Kong Exchanges (388) (HKXCF) said the acquisition will be financed in part by cash and a long-term loan of at least 1.1 billion pounds.
The Hong Kong bourse operator said it hopes to refinance part or all of the loan with a combination of new equity and bond issuance at a later date.
Hong Kong Exchanges beat out a rival bid from commodities bourse
Hong Kong Exchanges said the acquisition will accelerate its effort to branch out into commodity trading as well as diversify its revenue sources beyond equity and equity derivatives.
The Hong Kong government ranks as HKEx's largest single shareholder, controlling a 5.8% stake. It also appoints half of the 12 non-executive members on its board of directors.
As part of its strategic plan, HKEx says it intends for the LME to remain under the regulatory authority of the of the FSA in London.
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