Hong Kong Exchanges & Clearing Ltd. or HKEx Friday said it has agreed terms of a recommended cash offer for the entire issued and outstanding share capital of London Metal Exchange or LME Holdings Ltd. by HKEx Investment (UK) Ltd., for a value of 1.39 billion pounds (HK$16.67 billion or $2.18 billion). The transaction is expected to be earnings enhancing for HKEx in the third year following completion.
HKEx Investment is a direct subsidiary of HKEx International Ltd., and an indirect wholly-owned unit of HKEx. The transaction is expected to bring together the world's leading base metals exchange trading venue with the leading operator of exchanges and clearing houses in Asia.
As per the terms of the offer, HKEx Investment will buy LME Holdings for 107.60 pounds per ordinary share in cash by way of a court sanctioned scheme of arrangement. This implies a value of 1.39 billion pounds based on 12.9 million ordinary shares. The transaction is expected to close during the fourth quarter of 2012.
Based in London since its establishment in 1877, the LME is a global exchange with an estimated 80 percent market share of global base metal futures trading volume.
Charles Li, chief executive of HKEx said, "The acquisition of LME Holdings represents a unique opportunity for us to acquire in one stroke a position of global leadership in the commodities market. This is consistent with our strategy to expand beyond equities and equity derivatives and offers significant opportunities for revenue growth."
HKEx also believes that the addition of a strong commodities component to its existing businesses will support and enhance its growth prospects while diversifying its earnings base.
According to HKEx, the offer consideration will be financed from existing cash resources and new bank facilities of at least 1.1 billion pounds.
HKEx is the world's second largest exchange group by market capitalization, with a market value in excess of 9.8 billion pounds as at June 14, 2012.
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