State-owned CDB has committed to provide a US$1.8bn three-year bilateral facility for HKEx, with the funds coming from CDB and its Hong Kong branch.
The jumbo commitment from CDB comes only weeks after it agreed to lend US$1bn over three years to support the reorganisation of internet retailer Alibaba, suggesting that the China’s biggest policy lender is expanding beyond its traditional remit.
News of CDB’s involvement emerged last Friday, when HKEx announced that it had agreed to buy LME and would finance the acquisition through loans totalling at least £1.1bn, naming CDB as one of its lenders.
Deutsche Bank, HSBC and UBS had earlier agreed to provide an underwritten US$2bn bridge facility to support HKEx’s bid for LME. Market sources said the CDB bilateral was expected to replace that US$2bn bridge loan.
HKEx also said it expected to refinance part or all of the credit facilities at a later date through a combination of equity and bond issuance.
HKEx is offering £107.60 for each LME share in a deal that has the LME board’s backing but is still subject to approval by LME shareholders. The merger would give HKEx a sought after commodity trading platform and brings LME members closer to China, the world’s biggest metals buyer.
In Monday’s trading session in Hong Kong, the first since the acquisition was announced late on Friday, HKEx shares slipped as much as 4.5% to HK$107.40, their biggest percentage fall since June 4. The benchmark Hang Seng Index was up 1.6%.
HKEx, the world’s second-biggest bourse by market value, is paying 58 times LME’s adjusted 2011 earnings to get access to the commodities trading platform, which it sees as key for fuelling future growth as the pace of IPOs slows.
The acquisition needs the approval of the UK’s Financial Services Authority, as well as 75% of LME shareholders. Completion is expected in the final quarter of this year.
The LME, which is owned by its members and has Europe’s last open outcry trading pit, had invited binding bids from what is reported to be a shortlist including HKEx, CME Group, NYSE Euronext and InterContinental Exchange.
