LME CEO: Deal Not Likely Before End of 2Q

Reuters

Any potential deal to sell the London Metal Exchange (LME) is not likely to be concluded before the end of the second quarter next year, the LME's Chief Executive Martin Abbott said on Monday.

Speaking at a seminar at the beginning of LME Week, Abbott said the exchange is in the process of registering interest from bidders and will set up a "data room" -- opening the books to would-be buyers -- by December.

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The 134-year old LME, the world's biggest market for industrial metals, said late September it was considering a sale after receiving "several expressions of interest."

"If and when the board is satisfied that there is something serious that the shareholders should see I can't imagine that is going to happen before the end of the first quarter, possibly the beginning of Q2," Abbott said at the LME Week seminar.

"If shareholders decide that there is something they want to take up... I can't see that (a deal) come to a conclusion until the end of Q2."

In an interview with Reuters last week, Abbott said interest in the LME as a takeover target has snowballed and the number of suitors has risen to double digits because business is booming with volumes at record levels.

There is market speculation that the list of potential acquirers may include CME Group IncCME.O, the largest futures exchange in the United States, IntercontinentalExchangeICE.N and UK-based broker ICAP IAP.L.

"COMPELLING REASON" TO SELL

The LME was established back in 1877 above a hat shop in Lombard Court, and is now one of the last bastions of open outcry trading. Trading houses and banks that use the market also own it.

Metal industry sources have said the bid could be worth a potential 1 billion pounds, if shareholders are persuaded to sell.

"We're (the LME is) not for sale, we have been approached. We don't need to sell," said Gavin Prentice, managing director and global head of sales at LME shareholder Marex Financial Limited.

"If we sell or not there has to be an incredibly compelling reason for us to do so," Prentice said during a panel discussion at the LME Week seminar.

Major LME shareholders include companies such as U.S. banks Goldman Sachs (NYSE:GS) and JP Morgan (NYSE:JPM) and trading firms including Amalgamated Metal Trading and Metdist.

INDUSTRY GATHERS

The metal industry is gathering in London this week for the annual LME Week event.

Speaking at the panel discussion, LME's head of business development Chris Evans said clearing is potentially a very lucrative area for members and users of the LME, adding that it was not a surprise that other exchanges have also identified it.

"It probably isn't a coincidence that there has been interest in purchasing the exchange after we made our announcement," Evans said, on the LME's decision to investigate setting up its own clearing system.

"What we've done is we've identified... potentially a very important and lucrative area. It's an area where we quite feasibly weren't extracting value for our members and users of the market. And it is no surprise other exchanges have also seen this."

Commenting on new products, LME Asia's Managing Director Liz Milan said the exchange is looking at additional products for steel.

"The LME is looking at additional upstream and downstream products," said Milan. "We are also looking at index, cash-settled products," she said.