UPDATE: London Metal Exchange: Received 'Expressions Of Interest' For Exchange
September 23 2011 - 4:12PM
Dow Jones News
The London Metal Exchange has received "several expressions of
interest" in the company and will begin a formal process to review
potential offers for the exchange, Chief Executive Martin Abbott
said Friday.
Proposals value the member-owned market, which trades contracts
in copper, aluminum and other metals, at approximately GBP1 billion
($1.55 billion), according to a person involved in the process.
Derivatives exchange operators CME Group Inc. (CME),
IntercontinentalExchange Inc. (ICE) and Singapore Exchange Group
(0068.SG) are the most likely buyers of the LME, according to this
person, though other firms may also assert interest in a deal.
Spokesmen for CME and ICE declined comment Friday.
Representatives of the Singapore Exchange were not immediately
available for comment.
In the highly automated world of financial exchanges, the LME
appears something of a relic. It is among the last remaining
exchanges still owned by members, and operates "open outcry"
trading on a physical floor. An estimated 80% of the world's trade
in non-ferrous metals flows through its systems each day.
LME's Abbott revealed the proposals Friday in a statement to
exchange members, adding that the review process--which is at an
early stage--"may or may not lead to an acceptable offer for the
company being received."
The company confirmed it has retained Moelis & Co. as a
financial adviser.
A potential acquisition of the LME follows a wave of exchange
deals proposed over the past 12 months, though just a few have
survived scrutiny from regulators and shareholders.
Deutsche Boerse AG's (DB1.XE, DBOEF) proposed acquisition of
NYSE Euronext (NYX), the sector's biggest potential transaction, is
entering the final stages of a lengthy antitrust review in Europe.
It has outlasted other combinations, such as the London Stock
Exchange Group's (LSE.LN) planned merger with TMX Group Inc. (X.T)
and Singapore Exchange's attempted takeover of Australia's ASX Ltd.
(ASX.AU), both of which fell apart in recent months.
The LME, founded in 1877, trades forward and spot contracts in
copper, aluminum, lead, zinc, tin, molybdenum, cobalt and steel
billet, among other products. Its long-established role as a hub
for trade in fast-growing metals markets make it an attractive
addition to companies like CME or ICE that already run
resource-trading franchises.
Singapore Exchange already maintains a partnership with the LME,
centered on jointly traded contracts linked to the price of zinc,
copper and aluminum.
"We have built a modern, innovative and successful exchange
vital to those companies that own it and use it every day," Abbott
said. "The LME's future as the world's leading metal exchange is
more secure today than at any point in its 130 year history."
The London Metal Exchange this year has pushed a wide-ranging
strategic rethink that included a potential move to bring in-house
the clearing of trades on its markets, following an example set by
larger exchange groups like ICE and NYSE Euronext. This month the
LME hired Trevor Spanner, a clearing industry expert, as managing
director of post-trade services.
Interest in a deal for the LME rose after the exchange in May
looked at the possibility of starting its own clearinghouse, a move
that would bring additional fee revenue and also give it more
control over developing new derivatives. An acquirer like CME or
ICE that already runs a London-based clearing firm could
incorporate its metals products alongside services for related
markets, like energy.
-By Matt Day, Dow Jones Newswires; 212-416-4986;
matt.day@dowjones.com
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