UPDATE: London Metal Exchange: Received 'Expressions Of Interest' For Exchange

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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