After successful dealing, JPMorgan Chase bought an additional 4.7 percent stake in the London Metal Exchange from the insolvent brokerage MF Global, in a deal valued at $38.9 million. This is according to persons privileged with the information about the deal.
JPMorgan Chase bought MF Global’s holdings in LME via an auction led by the accountancy firm KPMG. The deal is to be announced sometime early next week.
Although JPMorgan purchased the position at a discount, the £25 million deal leaves London Metal Exchange value at about £530 million to £560 million. This is according to the same sources.
To help raise funds to pay off its creditors, MF Global’s Estate will be seeking to sell the remaining parts of the company through a series of sale outlets. However, lawyers representing MF Global in bankruptcy court said that much of the estate’s assets are held in several subsidiaries controlled by different trustees, a thing that will complicate the sell out process.
After the purchase of the 4.7 percent stake, JPMorgan’s stake now stands at 10.9 percent, as it owned 6.2 percent of MF Global previously, making it the biggest shareholder in the company.
JPMorgan purchased 600,000 Group A shares, valued at £25 million and 25,000 Group B shares for £2 million. Group A shares accord the bank voting rights unlike Group B shares, making JPMorgan a recognizable force within the company. Top market player Goldman Sachs holds a 9.5 percent stake in the company, making it London Metal Exchange’s second largest shareholder.
The deal leaves JPMorgan Chase in a very lucrative position; a ripe position that will see the bank benefit from any future sale of large metal marketplace.
In the month of September, London Metal Exchange, which specializes in the trade of minor metals, non-ferrous metal and steel, announced that several acquirers had expressed interest, and that it was juggling its options.
While the firm failed to name potential bidders, marketplace analysts say either the International Exchange or the CME Group could be probable acquirers. The takeover is expected to attract a £1 billion price.
London Metal Exchange has greatly benefitted from rising prices for raw materials and a demand that is growing exponentially. Last year, London Metal Exchange’s trading volumes hit the equivalent of $1.6 trillion, with an everyday average of $46 billion.