Regulatory hurdles are the next challenge in HKEx bid for LME

Elizabeth Fournier
HAVING secured a recommendation from the board of the London Metal Exchange (LME) for its £1.4bn takeover last Friday, Hong Kong Exchanges & Clearing (HKEx) will now be shifting its focus to winning approval for the deal from regulators.

Though the deal is subject to shareholder approval – with a vote for major investors including JP Morgan and Goldman Sachs expected before the end of next month – it must then also clear the desk of the UK’s Financial Services Authority.

Though HKEx’s chief executive Charles Li has vowed to maintain the traditions of the 135-year-old LME, the only open outcry trading floor left in the City, until at least 2015.

But more pressing on the FSA’s agenda will be a potential threat to the LME’s corporate governance, with the watchdog keen to ensure it can maintain its high standard of domestic supervision of the exchange once control passes to its new owners.

Recent cross border consolidation attempts among exchanges have been dogged by regulatory problems, most recently when the European Commission blocked NYSE Euronext’s sale to Deutsche Boerse earlier this year.

And last year the Australian government blocked Singapore’s planned takeover of the ASX over fears it threatened national interests.



MOELIS & Company is acting as financial adviser to LME Holdings on HKEx’s recommended takeover bid for the exchange, with managing director Caroline Silver on the team alongside executive director Holger Vieten.

Silver’s most high profile deal in recent years was advising GLG on its takeover by Man Group in 2010, but she has plenty of experience advising stock exchanges on cross border transactions, having been the main adviser to Euronext on its tie-up with NYSE, and helping Norse exchange OMX on its sales to Borse Dubai during her 14 years at Morgan Stanley.

Rothschild’s Stephen Fox and Philippe Le Baque are acting as financial advisers to HKEx, along with Matt Chamberlain from UBS.

For legal advice, LME turned to magic circle firm Freshfields Bruckhaus Deringer, which fielded an M&A team led by partner Sundeep Kapila, as well as financial services head Michael Raffan and lawyers from the tax and employments teams.

It is also working with Jones Day partner Frances Murphy on competition aspects of the transactions.

Allen & Overy, led by corporate partner Alistair Asher, is acting as legal adviser to HKEx.