NYSE Euronext Inc.
CME Group Inc.
) has also been eliminated from the race to acquire the London
Metal Exchange ("LME"), as per Bloomberg. Following the exit of CME
) and Hong Kong Exchanges & Clearing Ltd. ("HKEC") remain in
contingent to take over the 135-year old metal exchange.
LME is considering the offers of the two bidders and will take
its final call after taking into account the companies' ability to
develop LME's business, the viability of their plans as well as the
bid price. Both ICE and HKEC are said to have placed bids of over
£1.0 billion for the deal, although the prices are open to
However, it is expected that the two competing exchanges will
meet the shareholders of LME before the final decision is taken.
The bidders require the support of shareholders owning at least 75%
of LME's shares. The final decision is expected to take a few more
CME's successful takeover of LME would have mellowed the
competition in the metal exchange market as the exchange directly
competes with LME for US copper contracts and also has an expanding
steel trading business, while neither ICE nor HKEC offer metal
contracts at present. The purchase would have significantly boosted
the competitive strength of CME's metal exchange, Comex.
Nevertheless, HKEC provides LME with opportunities to expand in
China, which is the largest consumer of metal, as well as the
chance to offer clearing services in Chinese Renminbi. On the other
hand, ICE boasts a large clientele in Asia, who hold the potential
to be prospective customers for LME's metal contracts.
LME is highly sought after as it is the largest metal futures
exchange in the world. It offers global benchmark futures and
options contracts on base and other metals, including aluminium,
aluminium alloy, NASAAC (North American Special Aluminium Alloy),
cobalt, copper, lead, molybdenum, nickel, steel billet, tin and
zinc. The exchange traded metal contracts worth $15.4 trillion last
Shareholders of LME include a large number of renowned
investment banks, such as
JPMorgan Chase & Co.
Goldman Sachs Group Inc.
CME currently carries a Zacks #5 Rank, which implies a Strong
Sell rating for the short term. We maintain a long-term Neutral
recommendation on the shares.
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