-LME members to vote on GBP1.388 billion deal with Hong Kong
Exchanges on July 25
-Hong Kong Exchanges offer is worth more than double current
share price
-Deal needs backing of 75% of shares and 50% of members for it
to go ahead
(Adds details and context throughout.)
By Andrea Hotter
Shareholders in the London Metal Exchange will vote on the
proposed sale of the 135-year-old exchange to Hong Kong Exchanges
and Clearing Ltd. (0388.HK) on July 25, the LME said Monday.
The bid is an all-cash offer worth 1.388 billion pounds, ($2,150
billion) equivalent to GBP107.6 a share, a huge premium to the
GBP41.92 a share currently. If shareholders vote in favor, the deal
is slated to complete in the fourth quarter.
Hong Kong Exchanges will need to convince LME members, who are
also its shareholders, to sell their shares. A sale isn't
guaranteed and the approval threshold is high, with 75% of shares
and 50% of members needed to back the deal for it to go ahead.
JP Morgan is the biggest shareholder with a 10.8% stake held by
various of its subsidiary firms, giving it a stake worth around
GBP150 million based on the current offer price. Goldman Sachs
holds the next largest stake at around 9.53%, followed by Metdist,
the ring dealing firm owned by Lord Raj Bagri whose subsidiaries
have a combined stake worth 9.39%.
If all of the category one and two members of the LME that hold
ordinary shares in the exchange vote in favor of a deal, it would
go ahead with a 78% majority.
The allure of improved access to Asia and particularly China,
the world's biggest consumer of metals, was a key reason for the
LME picking Hong Kong Exchanges as its preferred bidder following
an auction process lasting several months.
Hong Kong Exchanges has said it will support the development of
the LME's own clearing house, LME Clear, designed specifically to
meet the needs of LME members. It also said it plans to support the
LME in expanding its warehouse network in Asia, expand the number
of mainland Chinese participants and clients, and enhance market
data distribution and connectivity into Asia.
Hong Kong Exchange meanwhile plans to retain the LME's existing
business model, including open-outcry trading in the ring, daily
prompt date contract structure, membership structure and capacity
for warehousing and physical delivery. It will not increase fees
for contracts currently traded on the LME before Jan. 1, 2015.
The LME will remain based in London as a regulated investment
exchange, under supervision of U.K. regulator the Financial
Services Authority.
The current LME Chief Executive Martin Abbott will stay on after
the deal closes, and most of the management team will remain in
place.
Write to Andrea Hotter at andrea.hotter@wsj.com