Hong Kong Exchanges and Clearing confirmed on Monday that it was considering a bid for the London Metal Exchange, as the battle heated up for the world’s largest metal-trading platform.
In an open letter to regulators, the Hong Kong exchange said it was one of the potential bidders for the L.M.E. The Asian firm, which is the world’s biggest financial exchange based on market capitalisation, joins NYSE Euronext and IntercontinentalExchange in the chase for the L.M.E., according to people with direct knowledge of the matter.
The 135-year-old London Metal Exchange has said a small number of potential acquirers have until May 7 to submit second-round bids.
A pending deal could value the exchange at £1 billion ($1.6 billion). It handles roughly 80 percent of global futures trading for commodities like aluminum, copper and zinc.
Despite the potential high price tag, the Hong Kong exchange has the financial resources to pull off a deal. The firm reported a net profit of 5.1 billion Hong Kong dollars ($657 million) last year, despite a pullback in public offerings in the second half of 2011.
“If the need for additional financing in connection with that process arises, the board will explore and evaluate appropriate available sources of funds,” Hong Kong Exchanges and Clearing said in a statement. “At this stage, there can be no certainty as to the outcome of that process.”
The addition of the London Metal Exchange also would allow the Hong Kong exchange to benefit from the increasing shift of commodities trading to emerging economies, which continue to consume rising levels of metals and other raw materials. -By Mark Scott