A $2.15bn bid for the London Metal Exchange has sealed it for HKex, beating Intercontinental Exchange to end a nine-month bidding war. From the statement:
The board of Hong Kong Exchanges & Clearing Limited (“HKEx”) is pleased to announce that on 15 June 2012, HKEx, HKEx Investment (UK) Limited (“HKEx Investment”) and LME Holdings Limited (“LME Holdings”) entered into a Framework Agreement regarding the terms of a recommended cash offer (the “Offer”) for the entire issued and outstanding ordinary share capital of LME Holdings by HKEx Investment, a direct subsidiary of HKEx International Limited (“HKEx International”) and an indirect wholly-owned subsidiary of HKEx (the “Transaction”).
Under the terms of the Offer, HKEx Investment will acquire the entire issued and outstanding ordinary share capital of LME Holdings for GBP 107.60 (HKD 1,292.55) per ordinary share in cash by way of a court sanctioned scheme of arrangement under Part 26 of the Companies Act 2006 (the “Scheme”). This implies a value of GBP 1,388 million (HKD 16,673 million) based on 12,900,000 ordinary shares (100 per cent of the ordinary share capital of LME Holdings) (the “Ordinary Shares”), with the Offer consideration being financed from existing cash resources and new bank facilities of at least GBP 1,100 million (HKD 13,214 million).
The deal will seemingly help the world’s largest metals exchange develop closer ties to Asia. Critics, however, have argued that the takeover may give Beijing too much influence over the metals market. HKex is 5.8 per cent owned by the Hong Kong state.
Damien Reece writing in The Telegraph:
It’s true the government owns only a 5.8pc stake in HKEx, but why waste money taking a bigger stake to exert influence when you already appoint the company’s chairman plus five directors with only six other non-executives plus the chief executive? That is influence of a powerful and direct nature… How can a 5.8pc shareholder be allowed to exert such control over the board – never mind that it’s the state exerting that control? Such an arrangement is transparent state interference. There’s nothing to stop anyone doing business with a state entity but please don’t pretend that entity is a paragon of corporate governance somehow equivalent to UK standards.
But back to the deal:
Together, HKEx and the LME will focus on three key areas:
1. Preserving and enhancing the LME’s existing business model;
2. Expanding the presence of the LME in Asia and China; and
3. Developing the LME over time in accordance with the needs of its members and market participants.
It all still needs to be approved by an LME shareholders’ vote.
More details here.