Reuters: Regulatory News: UPDATE 1-HKEx confirms interest in LME auction

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UPDATE 1-HKEx confirms interest in LME auction Apr 30th 2012, 10:12 Mon Apr 30, 2012 6:12am EDT * Second round of bids due by May 7 * HKEx trades at P/E of 25.3 times forward earnings * Has cash and short-term investments around $3.9 bln end-2011 HONG KONG, April 30 (Reuters) - The operator of the Hong Kong stock exchange confirmed on Monday its interest in the auction process for London Metal Exchange (LME), which is estimated to be worth between 500 million and 1.5 billion pounds ($783 million-$2.4 billion). HKEx, the world's No. 2 listed stock exchange by market value, is vying with CME Group Inc, NYSE Euronext and InterContinental Exchange Inc (ICE) to buy LME, sources previously told Reuters. "The board confirms HKEx continues to participate in that process and understands it is one of a number of interested parties studying this opportunity," Hong Kong Exchanges and Clearing Ltd (HKEx) said in a statement on Monday. LME, which handles about 80 percent of global futures trading in industrial metals, will be a prized asset for HKEx having made its ambitions clear to ramp up in commodities. That push into commodities trading is driven by CEO Charles Li and head of market development Romnesh Lamba, both ex-investment bankers. But HKEx sat on the sidelines during last year's wave of stock exchange consolidation and instead focused on forming alliances with its neighbouring Shanghai and Shenzhen stock exchanges. HKEx, which has a market value of about $17.1 billion, is well funded and has zero debt. It sits on cash and short-term investments of around $3.9 billion as of end-2011, Thomson Reuters data show, though it has limited ability to dip into its cash reserves for acquisitions as it has to maintain a capital buffer to meet counterparty risks involved with running a clearing house. HKEx said in the statement on Monday that if it needed additional financing, the board will explore and evaluate appropriate funding sources in consultation with its shareholders. HKEx could raise as much as $3 billion through a bank loan, a source told Reuters earlier this week. . LME, the 135-year old commodities exchange, has set a May 7 deadline to submit second round bids. Analysts say HKEx could easily raise funds by selling new shares and the company has recently secured shareholder approval to issue up to 10 percent of its existing share, double the amount it asked for last year. HKEx is the most expensive among large publicly-listed exchange operators in the world, with a price-to-earnings ratio for the coming 12 months of 25.3, compared with 15.6 for larger rival CME Group Inc, 10.3 for Deutsche Boerse and 11.7 for BM&FBovespa, which operates the Sao Paulo stock exchange. Link this Share this Digg this Email Reprints

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