LME Members Approve Acquisition by Hong Kong Exchanges

Source: Wall Street Journal By Francesca Freeman

LONDON—Hong Kong Exchanges and Clearing Ltd. has secured approval from London Metal Exchange shareholders to acquire the exchange, the LME said Wednesday.

The company's all-cash offer, worth 1.388 billion pounds ($2.15 billion), received approval from shareholders representing 99.63% of LME shares, the exchange said. The deal is slated to complete in the fourth quarter and is subject to the approval of U.K. regulator the Financial Services Authority.

The allure of improved access to Asia, particularly the world's biggest consumer of metals, China, was particularly important to the LME's original decision to pick Hong Kong Exchanges as its preferred bidder, following an auction process lasting several months.

Hong Kong Exchanges fought off tough competition from a number of other industry players to finally secure its position as preferred bidder last month. Both CME Group Inc. and NYSE Liffe, the London-based derivatives arm of NYSE Euronext, were eliminated from the bidding process in May. IntercontinentalExchanges Inc. was knocked out of the frame in the final stage.

Hong Kong Exchanges has said it would support the development of the LME's own clearing house, LME Clear, which is designed specifically to meet the needs of the London exchange's members. Hong Kong Exchanges also said it plans to support the LME in expanding its warehouse network in Asia, increase 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. This includes open-outcry trading in the ring, daily prompt-date contracts, membership structure and capacity for warehousing and physical delivery. Hong Kong Exchanges won't 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 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.