Stock Market Watch

JP Morgan Chase Purchases LME Stake from MF Global

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JPMorgan ChaseJP Morgan Chase & Co. (NYSE:JPM) has announced that it is buying a stake in London Metal Exchange from MF Global and becoming the largest United States bank to hold a share in this historical metal exchange house.

JP Morgan will purchase about 4.7 percent of the stake in London Metal Exchange for around EUR 25 million, somewhere above EUR 40 per share. The purchase was made from the MF Global’s United Kingdom arm, KPMG.

Official announcement of the purchases of London Metal Exchange will come within a few days.


The purchase by JP Morgan could lead to a probable bidding war. The purchase also leads to the assumption that the London Metal Exchange is worth $828 million or EUR 530 million. This is the first public evaluation of the Metal Exchange since the institution announced in September that it would initiate a sales process if it was approached by more than 10 potential bidders.

The current shareholders of the London Metal Exchange are hoping for a EUR 1 billion evaluation.  A EUR 1 billion evaluation will help JP Morgan gain a huge profit out of its recent purchase. However, with the current uncertainties about the economic situation, analysts believe that the prices of the London Metal Exchange shares will come down. Also London Stock Exchange could opt out of a possible sale, looking at the current economic condition.

The London Stock Exchange ownership is restricted to around 90 members. With the current 4.7 percent purchase, JP Morgan will be the largest shareholder with 10.9 percent ownership. Last year the bank also bought Sempra stake from RBS, which gave its increased control over the metal sale process. The other major shareholders in the London Metal Exchange include a 9.5 percent stake held by Goldman Sachs, followed by a 9.4 percent stake held by Metdist. A 4.3 percent stake is also held by Swiss bank UBS.

According to sources who told about the MF Global’s stake sale, JP Morgan is also planning to buy about 25,000 of the B grade shares in the London Stock Exchange, which will give the bank rights to trading, but no ownership rights. The 25,000 B shares will be purchased at a cost of around EUR 2 million.

According to the people familiar with the purchase, the London Metal Exchange is attracting a lot of interest. These are regarded as the most coveted assets in United States brokerage bankruptcy.

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edliston
Post Written By: Ed Liston

Ed Liston is a senior contributing editor at TheStockMarketWatch.com. An active market watcher and investor, Ed guides an independent team of experienced analysts and writes for multiple stock trader publications. He is widely quoted in various financial publications on the Internet. When Ed is not writing about stocks, investing in stocks, talking about stocks, or otherwise doing something stock related, he likes to go sailing and fishing in his yacht.


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Ed Liston

Ed Liston is a senior contributing editor at TheStockMarketWatch.com. An active market watcher and investor, Ed guides an independent team of experienced analysts and writes for multiple stock trader publications. He is widely quoted in various financial publications on the Internet. When Ed is not writing about stocks, investing in stocks, talking about stocks, or otherwise doing something stock related, he likes to go sailing and fishing.

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