JPMorgan poised to make 157% return on MF Global’s LME stake

June 20 (Bloomberg) -- JPMorgan Chase & Co., the largest U.S. bank, is poised to more than double the value of its investment in London Metal Exchange shares bought seven months ago from the U.K. unit of bankrupt MF Global Holdings Ltd.

JPMorgan is the biggest investor in the LME, with 1.4 million shares valued at 150.6 million pounds ($236.8 million) after Hong Kong Exchanges & Clearing Ltd. agreed to buy the London bourse at 107.60 pounds a share. The New York-based bank increased its stake in November when it agreed to buy 600,000 shares from MF Global U.K. Ltd. at 41.92 pounds apiece.

“To say the price is very full and very generous to LME shareholders is an understatement,” said Peter Lenardos, an analyst at RBC Capital Markets in London. “The capital gain for them is massive. It’s an outstanding investment.”

Hong Kong Exchanges, which owns the fifth-largest equity market by market capitalization, offered 1.39 billion pounds on June 15 for the LME, which handled a record $15.4 trillion of contracts last year. The takeover would give the Asian exchange its first commodities business and the London bourse better access to China, the biggest user of everything from aluminum to zinc. LME shareholders will vote on the bid by the end of July.

MF Global, based in New York, filed the eighth-largest U.S. bankruptcy on Oct. 31 with debt of almost $40 billion after making wrong-way bets on sovereign debt. The 41.92 pounds paid by JPMorgan for MF Global’s shares compared with a previous sale of LME stock at 4.925 pounds in July. The 135-year-old LME had said in September it received “several expressions of interest” for the exchange.

‘Final Offers’

“While a condition on a price adjustment for any subsequent sale of the shares at a higher price was part of the sale negotiations, none of the nine parties who made final offers were prepared to agree to this condition,” Mike Pink, joint special administrator of MF Global U.K. at KPMG LLP, said in an e-mailed statement.

Kate Haywood, a London-based spokeswoman for JPMorgan, declined to comment.

Goldman Sachs Group Inc. raised its stake in the LME by 330,000 shares to 1.23 million in the year through September, according to U.K. Companies House filings. Lehman Brothers International Europe, the bankrupt London unit of Lehman Brothers Holdings Inc., transferred its 330,000 LME shares on July 1, according to Companies House. Goldman has never said whether it acquired those shares.

Page 1 of 2 >>

Copyright 2014 Bloomberg. All rights reserved. This material may not be published, broadcast, rewritten, or redistributed.

comments powered by Disqus
Check out Futures Magazine - Polls on LockerDome on LockerDome