With the takeover of the London Metal Exchange (LME) by Hong
Kong Exchanges and Clearing Limited (HKEx) at £107.60 per share,
the value of stakeholders' investments in LME would be enhanced.
JPMorgan Chase & Co.
(
JPM
), the largest investor in the LME, will get double the value of
its investment after the completion of the takeover. The takeover
awaits approval by the U.K. Financial Services Authority and
shareholders of the LME.
In November 2011, JPMorgan increased its stake in the LME by buying
an additional 4.7% stake (600,000 'A' shares) from
MF Global Holdings Ltd.
(
MFGLQ
), which went bankrupt in 2011 for £25.2 million ($39.6 million).
Currently, JPMorgan holds 1.4 million shares in LME, which is
valued at £150.6 million ($236.8 million) after the takeover
announcement.
JPMorgan also bought 25,000 'B' shares of the LME that were held by
MF Global, for £2 million ($3.125 million), through another deal.
While these shares gave the company the right to trade on the LME
as a category one member, the 'A' shares will entitle it to
economic and voting rights. According to LME standards, in order to
trade on the trading floor, category one members must own at least
25,000 'B' shares in the exchange.
Apart from JPMorgan, other large stakeholders in the LME include
The Goldman Sachs Group, Inc.
(
GS
) with 1.23 million shares valued at £132.3 million ($208 million)
and Metdist, a privately owned metals trader, with 1.21 million
shares valued at £130.4 million ($205 million). The ownership of
the LME is restricted to nearly 94 members.
Hence, with the sale of the LME, the stakeholders have recorded
significant capital gains. Also, HKEx plans to maintain LME's brand
name and will regulate the exchange in London. Moreover, with
China's penetration in the world of financial markets, LME
stakeholders will be benefited over the long term.
Currently, JPMorgan retains a Zacks #3 Rank, which translates into
a short-term Hold rating. Considering the fundamentals, we maintain
a long-term Neutral recommendation on the stock.
GOLDMAN SACHS (GS): Free Stock Analysis Report
JPMORGAN CHASE (JPM): Free Stock Analysis
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MF GLOBAL HLDGS (MFGLQ): Free Stock Analysis
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