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London and Singapore to tie up in £1bn bid for London Metal Exchange

by LLB Editor
30th Sep 11 12:21 pm

The London stock exchange (LSE) is in talks with the Singapore Exchange Ltd (SGX) to make a joint bid for the world’s largest metal market.

The London Metal Exchange is seeking a suitor in a deal that could be well worth over £1bn. The number of suitors for the exchange has risen to double digits, chief executive Martin Abbott told Reuters.

The consortium has appointed a bank to advise with the auction expected to attract rival offers.

This comes at the back of the ambitions of both exchanges to expand their fortress into the fast-growing space of metals trading, as traditional businesses of equity and derivatives trading faces increasing competition.

Earlier this year, both the SGX and LSE couldn’t reach common ground to bid for the metal exchange due to a loss of market share across the industry to alternative trading venues.

Speaking about the potential bid, Roger Tan, managing director at SIAS Research in Singapore, said, “This is a joint bid, so I guess SGX would have learned some lessons from the ASX(Australian security exchange) bid.

SGX, led by experienced dealmaker Magnus Bocker, has been trying to raise the profile of Asia’s second-largest listed bourse and compete against its larger rival in Hong Kong.

Bocker was the man spearheaded seven Nordic bourses to create the Swedish-Finnish financial services company, OMX which was later sold to NASDAQ.

But the Australian government rejected his proposal to buy ASX.

“To a certain extent, there is some necessity for SGX to try to grow both organically and by M&A [mergers & acquisitions]. LME has proven over the years to be a credible exchange. If anyone is able to acquire the platform, then it will be able to use the platform to expand its own business,” Tan added.

GX shares were trading down 1.5 per cent at S$6.62, giving it a market value of about $5.6 billion. LSE is valued at $3.5bn.

LME’s pre-tax profit in 2010 fell 28 per cent to £12.5m. Still the exchange’s pre-eminent position in the world of metals trading will make it a much sought after asset.

“But since LME is already an established arena, it won’t come cheap,” Tan added.

SGX declined to comment. Calls and an email to the London Stock Exchange’s media hotline were not immediately answered. The source declined to be named as the discussions were confidential.

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