LME auction reaching climax - note shareholders for the LME include GS and JPM , top institutional holders of ICE include JP Morgan , MS , BR Institutional Trust Company and State Street Corporation.

http://www.reuters.com/article/2012/05/31/lme-bids-idUSL5E8GV5NV20120531

* ICE, HKEx presenting binding offers to LME board

* AGM set for June 8, may be too soon for vote

By Harpreet Bhal and Maytaal Angel

LONDON, May 31 (Reuters) - Two suitors vying for the London Metal Exchange (LME) will make presentations of their bids to the bourse's board on Thursday, two sources with knowledge of the matter said, as the race to buy the 135-year-old institution nears its climax.

InterContinental Exchange and Hong Kong Exchanges and Clearing are the remaining two from a shortlist of four to buy the world's biggest metals market place after the recent exit of CME Group and NYSE Euronext.

"This is a regularly scheduled meeting, but it makes sense that they would want to hear from the bidders," one source said.

The LME declined to comment on the board meeting.

The ICE and HKEx bids are both just above the 1 billion pounds ($1.55 billion) mark that the LME has been independently valued at.

Both have guaranteed to keep the 135-year-old LME's operations unchanged, including its open outcry trading ring and its unique prompt-date system, sources with knowledge of the matter have said.

The LME intends to present just one bid to shareholders, sources have told Reuters.

There is an annual general meeting on June 8, but the sources said that would be too soon for shareholders to vote on a bid.

A special meeting of shareholders, which include U.S. banks J.P. Morgan and Goldman Sachs, would be called for that purpose, they said.

A bidder would have to win 75 percent of the shares in the LME as well as 50 percent of shareholders.

and.....

http://www.telegraph.co.uk/finance/comment/damianreece/9299754/More-reasons-why-the-LME-should-not-fall-into-Chinese-hands.html

China is the world’s leading consumer of commodities so gaining influence over the pricing and warehousing of those commodities is crucial to China and owning the LME would deliver that. The advantages to Chinese industry, over rivals, are obvious. It is therefore very surprising that no one in Europe, or the UK, has realised the importance of this putative deal.

The LME doesn’t physically own the warehouses but it does regulate them - thus dictating terms to the site owners. The LME is a hugely strategic piece of market infrastructure which should not fall into the hands of any one government. But it is a “must have” asset for China which is bidding for it through the state controlled Hong Kong Exchanges and Clearing. That’s why it’s willing to pay more than £1bn for it, even though the LME makes only about £10m in profit - a multiple that even Facebook couldn’t command in its over priced IPO.

The Americans, in the shape of the InterContinetal Exchange, are also after the LME and are willing to pay a similar price but are bidding as an exchange operator rather than a sovereign-backed entity. However, it’s no surprise that the world’s two economic super powers are vying to control the LME. It reflects the exchange’s strategic importance and why its ownership matters.

It’s not at all clear what Hong Kong Exchanges and Clearing would do with the future of metals trading in the UK but if activity moved away from London to Hong Kong allied activity in the City of London would likely follow.

Given the LME’s dominant position in the trading and price discovery of industrial metals it would be impossible for a rival exchange to develop. Once infrastructure such as the LME has gone, it’s gone forever.

If a UK-based investor, for instance, wanted to purchase a local Hong Kong or mainland Chinese infrastructure asset, such as an exchange, the answer would certainly be no. This lack of reciprocity is another reason why selling to a government such as China is a mistake.

It would be a contradiction for a buyer, such as China, to have such influence over a market that sets prices for both buyers and sellers. Such a market is better controlled by disinterested parties who make a return purely from operating efficient markets.