JPMorgan to Raise Stake in LME - Analyst Blog
November 23 2011 - 10:59AM
Zacks
On Tuesday, Financial Times reported that
JPMorgan Chase & Co. (JPM) is increasing its
stake in the London Metal Exchange (LME). According to the report,
the company is buying additional 4.7% stake (600,000 ‘A shares’) in
the LME from currently bankrupt MF Global Holdings
Ltd. (MFGLQ) for £25 million ($39.1 million).
JPMorgan will buy the stake in an auction process handled by MF
Global’s administrator, KPMG. Before closing, the deal requires the
LME board’s approval. Following its completion, JPMorgan, which
presently holds 6.2% stake in LME, will become the largest
stakeholder with nearly 10.9% stake.
JPMorgan will also buy 25,000 ‘B shares’ of the LME that were
held by MF Global, for £2 million ($3.125 million), through another
deal. While these shares will provide the company the right to
trade on the LME as a category one member, the ‘A shares’ will
entitle it to economic and voting rights. According to the LME
standards, in order to trade on the trading floor, category one
members must own at least 25,000 ‘B shares’ in the exchange.
Apart from JPMorgan, other large stakeholders in the LME include
The Goldman Sachs Group, Inc. (GS) with 9.5%,
Metdist, a privately owned metals trader, with 9.4% and UBS
AG (UBS) with a 4.3% stake. The ownership of the LME is
restricted to nearly 90 members and hence, its shares rarely come
up for sale in the market. The last stake exchange occurred in July
when Goldman bought a stake from Lehman Brothers’ European arm.
The LME is also an attractive acquisition target. In September,
it reported about receiving several ‘expressions of interest’ from
potential buyers including CME Group Inc. (CME),
IntercontinentalExchange Inc. (ICE) and the
Singapore exchange.
Hence, by increasing its stake in the LME, JPMorgan, will be in
a position to receive a bigger payout in case LME gets sold out.
Also, the company will have greater influence on various decisions
such as to whom and under what terms the sale will be made.
Currently, JPMorgan retains its Zacks #3 Rank, which translates
into a short-term Hold rating.
CME GROUP INC (CME): Free Stock Analysis Report
GOLDMAN SACHS (GS): Free Stock Analysis Report
INTERCONTINENTL (ICE): Free Stock Analysis Report
JPMORGAN CHASE (JPM): Free Stock Analysis Report
MF GLOBAL HLDGS (MFGLQ): Free Stock Analysis Report
UBS AG (UBS): Free Stock Analysis Report
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