Hong Kong Exchanges and Clearing wants to buy the London Metal Exchange in order to diversify its business, but analysts question how the acquisition will really help the city develop its own commodities trading.
HKEx chairman Charles Li Xiaojia (pictured) was in London last week to lobby LME shareholders to accept the takeover offer, trying to convince them that the bourse can help it develop its commodities business in mainland China.
The bid marks the first overseas takeover attempt by the local bourse.
US-based Intercontinental Exchange and HKEx are the two remaining bidders for the 135-year-old exchange, the world's largest metal trading platform that handled a record US$15.4 trillion in contracts last year. Both bidders have offered more than GBP1 billion (HK$11.93 billion) and pledged to keep the LME and its trading floor in London.
The LME board has not yet indicated its preference but analysts believe HKEx, with its links to mainland China, has a good chance of being selected. The LME has a worldwide warehouse network for metal delivery but has no operations in China. It still needs to win support from shareholders as well as British regulatory approval, so the deal may drag on for several months.
If the HKEx does buy LME, it will have little impact on its plan to expand trading in commodities in Hong Kong as LME operations will remain in London. And even if the LME can help train and launch commodity products, it may be difficult to attract trading.