) and Hong Kong Exchanges & Clearing Ltd. ("HKEC") have been
requested to resubmit their bids on June 7, for the buy-out of
London Metal Exchange ("LME") by the administrative authorities of
the same. This follows the presentation made by the contenders last
week at a board meeting organized by the selling company.
LME also mentioned, that on receiving the bids from
IntercontinentalExchange and HKEC, it would initiate a voting
procedure among its shareholders at an extraordinary general
meeting in order to shortlist one of the suitors who would finally
own the renowned metal exchange.
The shareholders of the company include some of the biggest
names in the investment bank segment, such as
JPMorgan Chase & Co.
Goldman Sachs Group Inc.
). It is expected that JPMorgan and Goldman Sachs will either
receive a large sum of money for their shares or continue to be the
shareholders of the acquiring exchange.
As per the norms set by LME, the prospective buyer will require
the approval of at least 50% of the members of the bourse and it
will need to attain 75% of the shareholders vote in its favor.
In a close competition with HKEC, to takeover the 135-year old
exchange that pioneers in setting benchmark prices for six base
metals, IntercontinentalExchange stands a golden opportunity of
winning the bid, given its experience in dealing with futures
exchanges for over a decade. Also, the Atlanta-based bourse has
relevant first-hand experience in warehousing soft commodities.
We believe that the acquisition of LME will strengthen
IntercontinentalExchange's UK presence and increase its customer
base to a large extent, subsequently aiding the company's top line.
One of the many benefits for IntercontinentalExchange will be a
dedicated exchange dealing with a range of futures and options
contracts for non-ferrous, minor metals and steel.
The company's immense growth potential has armed it with
competitive advantage over its peers with respect to the futures
market. Moreover its intermittent restructuring programs through
acquisitions and spin offs have driven robust inorganic growth,
which is reflected in increased assets and global expansion.
We retain our long term Neutral recommendation on
IntercontinentalExchange. It also has a quantitative Zacks #3 Rank,
which translates into a short-term Hold rating.
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