HKEx looks to raise $1b with new stakes

Hong Kong Exchanges and Clearing Limited (HKEx) intends to raise up to HK$7.75 billion ($1 billion) from an additional share offering meant to help fund its takeover of the 135-year-old London Metal Exchange (LME), according to a statement posted Friday on HKEx's website. Friday's fundraising target was revised up from the HK$6.24 billion goal HKEx had announced Thursday shortly after the Financial Services Authority, Britain's financial regulator, approved the Hong Kong holding company's plan to acquire the LME.

Specifically, HKEx now plans to float 65.7 million new shares each priced at HK$118, a discount of 5.4 percent compared to its closing price of HK$124.8 as quoted on the Hong Kong Stock Exchange Thursday.

HKEx also stated that the completion of its placement, which is still pending approval from market regulators in Hong Kong, could take place as early as December 7.

The increased fundraising target indicates that the market is more optimistic about the LME deal than the HKEx had originally expected, Yin Jianfeng, deputy director of the financial research institute under the Chinese Academy of Social Sciences, told the Global Times.

In response to news of the latest offering, the government of the Hong Kong Special Administrative Region, which already controls a 5 percent stake in HKEx, stated that it will pay HK$450 million to add a further 3.8 million shares of the holding firm to its portfolio.

Following a 10-month competitive auction, LME board members accepted a $2.2 billion takeover offer from HKEx, allowing the Hong Kong exchange operator to beat out rival bidders like CME Group Inc, Intercontinental Exchange Inc and NYSE Euronext.

The deal will offer the LME, the world's largest non-ferrous metal trading platform by trade volume, further access to the Chinese mainland, the world's largest metal consumer, Chow Chung Kong, chairman of HKEx, said Thursday.

The LME recorded $15.4 trillion in overall contract turnover last year, accounting for about 80 percent of the global trade in industrial metal futures.

On the mainland side, the acquisition by HKEx will also allow more domestic enterprises to become members of the LME, a move which will allow them to better connect with overseas consumers, said Wang Zhongmei, deputy director of the International Trading Research Division at the Shanghai Academy of Social Sciences.