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Competition For London Metal Exchange Heats Up
By Staff | 17 February, 2012

NYSE Euronext, CME Group and IntercontinentalExchange have all submitted bids for the London Metal Exchange, according to a Financial Times report.

The offers, said to value the exchange in the region of £1 billion, came after the exchange said that it had received preliminary expressions of interest from 10 potential buyers in September, and set a deadline of February 15 for takeover bids.

Other parties speculated to have expressed an interest in the 135-year-old exchange include Deutsche Boerse, the London Stock Exchange and Hong Kong Exchanges and Clearing, though the first two are not thought to have put in bids this week.

The world’s largest metals futures market is something of an anomaly in modern times, being one of the last member-owned exchanges—it is owned by the banks and brokers that use it, with JPMorgan Chase and Goldman Sachs among the largest shareholders—and being home to Europe’s last trading pit.

Shareholders will meet on February 23 to discuss the offers. Shareholders are said to be divided on the prospect of a sale, and a minimum of 75 percent shareholder support is needed for any takeover to take place.

Maintaining ownership infrastructure such as its warehousing facilities is believed to be an important factor in negotiations. The LME approves and licenses a network of storage facilities for the physical storage of industrial metals and issues warrants for metals held in these warehouses.

ETF Securities, for example, uses these warrants to purchase the metals underlying its physically-backed range of ETCs.

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