London Metal Exchange CEO expects bid vote approval

LONDON (Reuters) - The London Metal Exchange's (LME) chief executive is confident that its shareholders, with some persuasion, will approve a $2.2 billion offer by the Hong Kong stock exchange for the world's biggest marketplace for industrial metals.

"I think we will (get shareholder approval)," Martin Abbott said on the sidelines of the IDX International Derivatives Expo in London.

"It's a board recommendation and we wouldn't have recommended something we weren't confident about. But it doesn't mean it's a done deal. We have to get out there and talk to shareholders."

Hong Kong Exchanges and Clearing <0388.HK> (HKEx) said on June 15 it had agreed to pay 1.4 billion pounds ($2.2 billion) to buy the 135-year-old LME.

The LME board unanimously backed the bid but the deal is still subject to approval by LME shareholders.

Many shareholder members who own and use the exchange had feared a sale might alter its low fees and unique, complex structure of futures trading in copper, aluminum, lead, zinc, tin, nickel and other metals.

But the mood appears to be shifting in favor of the HKEx deal, shareholders have said over the past week.

Due to the lopsided spread of shareholdings between large and small members, the deal could fail if many small shareholders oppose the bid, which has to be approved by 75 percent of shares and 50 percent of shareholders.

Abbott said the LME was aiming for a shareholder vote to take place next month.

Sources close to the process have told Reuters the vote will take place in mid-July.

RIVAL EXCHANGES

HKEx beat U.S. commodities bourse InterContinental Exchange in the final stages of a contest that began in September with around 15 expressions of interest. CME Group , which had been on the short list, dropped out of the process in May.

ICE Chief Executive Officer Jeffrey Sprecher, also attending the IDX Expo in London, did not comment directly on losing the bid, but said there were plenty of other potential targets.

Sprecher said in a panel discussion that regulatory changes meant "there's a whole array of potential acquisitions for exchanges which exist around the over-the-counter markets."

The CME's CEO Phupinder Gill, also attending the event, declined to comment on the LME.

Abbott told the panel discussion the Hong Kong bid had been compelling because it took the LME closer to China, the world's biggest metals buyer.

"Asia is the next great growth story and also the biggest threat. When asked what was keeping me awake at night the answer was always the threat to us in Asia; that's where our business was tilted," he said.

"If the constraints come off the Chinese domestic exchanges they will be a very, very serious force globally and we needed to step up our game to be ready to compete with them."

China accounts for 40 percent of copper consumption.

Abbott downplayed worries about possible Chinese government meddling.

"We are confident the Hong Kong exchange operates as an independent exchange," he said.

The Hong Kong government has a 5.8 percent holding in HKEx. Beijing has no stake in the company.

(Writing by Susan Thomas; Editing by Anthony Barker)

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