Bloomberg News

LME Received ‘Many’ Expressions of Interest as It Clears Gold

October 04, 2011

Oct. 4 (Bloomberg) -- The London Metal Exchange said it received “many” expressions of interest the past 10 days in a possible takeover of the 134-year-old bourse that handles 80 percent of global trade in metals.

The LME, which counts Goldman Sachs Group Inc. and JPMorgan Chase & Co. among its biggest investors, will need “a compelling reason why shareholders should sell,” Chief Executive Officer Martin Abbott said at a dinner in London today, according to an e-mailed copy of his speech. The exchange matched and cleared its first gold trade today, he said.

Metals prices more than tripled in the past decade as demand from emerging markets overwhelmed supplies from mines, attracting a surge of interest from investors. The LME operates London’s last open-outcry transactions through a 6-meter-wide (20-foot) ring in which traders shout out orders, and handled a record $11.6 trillion of contracts in copper and other industrial metals in 2010, compared with $2.5 trillion in 1999.

“I am not surprised that we should be the subject of so much attention,” Abbott said at the dinner. “The LME occupies the number one slot in the world of metals trading; its volumes are rising, its capacity for growth is spectacular.”

The exchange told members in a notice Sept. 23 that it would begin a process that may lead to “an acceptable offer for the company being received.” The bourse got more than 10 “expressions of interest” by Sept. 28, Abbott said at the time. The board next meets Nov. 17, he said yesterday.

Silver Clearing

The LME intends to extend its over-the-counter bullion clearing service to silver next year, Abbott said at the dinner.

The exchange, which is examining the possibility of self clearing, launched its gold clearing service with LCH.Clearnet Ltd. last year. Growing “uncertainty” in financial markets may lead to more usage of exchange trading, valuations and independent clearing for LME products, Abbott said today.

“Anybody bidding for the LME is doing so because the LME is good at what it does, and because efforts to do it differently have not worked,” Abbott said, according to the speech. Opening bids will probably be made “early” next year, he said.

The LME has 94 members, and there are other enquiries about membership ``in the works,'' Abbott said.

--Editors: Claudia Carpenter, Dan Weeks

To contact the reporter for this story: Nicholas Larkin in London at nlarkin1@bloomberg.net

To contact the editor responsible for this story: Claudia Carpenter at ccarpenter2@bloomberg.net


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