HKEx makes US$2.15b offer for LME in 1st overseas acquisition
Source: Bloomberg News |
June 16, 2012, Saturday
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Print Edition
Print Edition
HONG Kong Exchanges & Clearing Ltd, host to the world's fifth-largest equity market, has agreed to pay 1.39 billion pounds (US$2.15 billion) for the London Metal Exchange, which handles more than 80 percent of global trade in industrial-metal futures.
LME investors will get 107.60 pounds per ordinary share in cash, with a vote scheduled before the end of next month, the bourses said yesterday. The stock traded at 4.93 pounds in July 2011, before the LME said it was considering bids. JPMorgan Chase & Co, Goldman Sachs Group Inc and closely held Metdist Ltd are the biggest LME shareholders.
The deal would be Hong Kong Exchanges' first overseas acquisition. The 135-year-old LME sets global benchmark prices for metals, including copper, aluminum and nickel.
"Hong Kong Exchanges can be positive for LME if it can enhance its China exposure," said Jonas Kan, the head of Hong Kong research at Daiwa Capital Markets. "HKEx has a clearing business, visibility in listing for Chinese companies, and has experience working with regulators and authorities in China, which can add value to the LME."
Buying the LME would give HKEx its first commodities contracts. HKEx is paying with existing cash and new loans of at least 1.1 billion pounds.
Shares of HKEx have declined 9.4 percent this year, valuing the company at US$15.66 billion. Its net income fell 7 percent in the first quarter as listing fees declined. HKEx recently lost its rank as the world's most valuable exchange company to CME Group Inc.
The Chinese city's bourse wants to expand its product base as the pipeline of large initial public offerings from the mainland dries up. Hong Kong has hosted US$3.2 billion in IPOs this year, compared with US$9.8 billion in the comparable period in 2011, according to Bloomberg News data.
"I'm skeptical about the deal," said Andrew Sullivan, principal trader at Piper Jaffray Asia Securities Ltd in Hong Kong. "They want to build up the bourse and expand into other areas. They're spending a lot of money at a time they're not getting an awful lot of income. You won't see the synergy straight away."
The LME reported a 19 percent drop in net income to 7.68 million pounds last year, even as revenue climbed 21 percent to 61.2 million pounds.
The offer will be recommended by all the LME's directors and sent to investors within 15 business days, with a meeting held before the end of July. It will need approval by more than 50 percent of LME shareholders, with the owners of at least 75 percent of the stock backing the move.
The takeover may be completed in the fourth quarter.
LME investors will get 107.60 pounds per ordinary share in cash, with a vote scheduled before the end of next month, the bourses said yesterday. The stock traded at 4.93 pounds in July 2011, before the LME said it was considering bids. JPMorgan Chase & Co, Goldman Sachs Group Inc and closely held Metdist Ltd are the biggest LME shareholders.
The deal would be Hong Kong Exchanges' first overseas acquisition. The 135-year-old LME sets global benchmark prices for metals, including copper, aluminum and nickel.
"Hong Kong Exchanges can be positive for LME if it can enhance its China exposure," said Jonas Kan, the head of Hong Kong research at Daiwa Capital Markets. "HKEx has a clearing business, visibility in listing for Chinese companies, and has experience working with regulators and authorities in China, which can add value to the LME."
Buying the LME would give HKEx its first commodities contracts. HKEx is paying with existing cash and new loans of at least 1.1 billion pounds.
Shares of HKEx have declined 9.4 percent this year, valuing the company at US$15.66 billion. Its net income fell 7 percent in the first quarter as listing fees declined. HKEx recently lost its rank as the world's most valuable exchange company to CME Group Inc.
The Chinese city's bourse wants to expand its product base as the pipeline of large initial public offerings from the mainland dries up. Hong Kong has hosted US$3.2 billion in IPOs this year, compared with US$9.8 billion in the comparable period in 2011, according to Bloomberg News data.
"I'm skeptical about the deal," said Andrew Sullivan, principal trader at Piper Jaffray Asia Securities Ltd in Hong Kong. "They want to build up the bourse and expand into other areas. They're spending a lot of money at a time they're not getting an awful lot of income. You won't see the synergy straight away."
The LME reported a 19 percent drop in net income to 7.68 million pounds last year, even as revenue climbed 21 percent to 61.2 million pounds.
The offer will be recommended by all the LME's directors and sent to investors within 15 business days, with a meeting held before the end of July. It will need approval by more than 50 percent of LME shareholders, with the owners of at least 75 percent of the stock backing the move.
The takeover may be completed in the fourth quarter.
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