Hong Kong Exchanges and Clearing Ltd (HKG:0388), or HKEx, reached on Friday a GBP1.388bn (USD2.2bn/EUR1.7bn) deal to buy British metals exchange LME Holdings Limited via a recommended cash offer at GBP107.60 a share, the buyer said.
Under the framework agreement, HKEx will carry out its offer through HKEx Investment (UK) Limited and will use existing cash and new bank debt to finance it, it said.
LME’s board said it would recommend shareholders to vote in favour of the deal at their meeting to be scheduled before the end of July.
The acquisition gives HKEx an immediate top position in the global commodities market, serving its strategy to expand beyond equities and equity derivatives, CEO Charles Li said. The combination would also ensure substantial revenue growth opportunities for HKEx, while allowing LME to boost its operations in Asia in general and particularly in China, Li, added.
In turn, LME’s chief executive Martin Abbott sees the transaction to secure LME’s future for its next 135 years, while positioning it as the foremost base metals trading venue in the world, he said.
The buyer pledged to preserve LME’s existing business model and to further develop the company in line with the needs of its members and market participants. It would also fully ensure the employment rights of the LME’s management and employees. HKEx plans to support LME in securing authorities approval to expand its warehouse network in Asia, including China, as well as to add new products and services to the LME and to bring new participants and clients from mainland China to its portfolio.
HKEx expects the addition of LME to boost its earnings in the third year of ownership, it said.
The deal is subject to securing the approval of a majority of LME shareholders, as well as clearance from the UK’s financial regulator FSA. Completion is expected in the fourth quarter of this year.
London-based LME, founded in 1877, is a global exchange with a market share of global base metal futures trading volume estimated at 80%.
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