When the London Metal Exchange confirmed last September that its members and shareholders were willing to consider takeover bids, CEO Martin Abbott wasn’t expecting to be inundated with offers. Within weeks, however, more than a dozen potential buyers — a group that includes the CME Group, IntercontinentialExchange and a joint bid by the London Stock Exchange Group and Singapore Exchange, according to industry analysts — had expressed interest in acquiring the business, which is the world’s largest trading platform for nonferrous metals. 

Now, five months later, the LME’s board of directors is poised to decide the exchange’s fate. On February 23 it will meet to consider initial bids for the LME, which recently reported record annual trade volumes — volumes that rose 21.9 percent year over year to 146.6 million lots in 2011. The exchange also posted record trade value in 2011, which increased by 32.8 percent year over year to $15.4 trillion. If the board approves a takeover, the coming sale will mark the end of an era for the LME, which was founded 135 years ago above a London hat shop and has fiercely guarded its autonomy ever since.

In anticipation of a potential sale, Abbott agreed to speak to Institutional Investor’s London Bureau Chief, Loch Adamson, about the prospect of a deal and the LME’s competitive strategy as the global market for nonferrous metals expands.

1. How likely is the LME to agree to a deal?

The line we’ve taken throughout this process is that the LME is not necessarily for sale — we never put the For Sale sign up. We received an unsolicited approach and thought it would be sensible to find out what other interest might exist. So the day before the first expression of interest arrived, we had no pressing need to sell the exchange, and the day after, nothing had changed. We are not in a position of having to sell. So it is really up to the would-be buyers to show the shareholders that they can provide a compelling reason for us to sell. But it is quite possible that when all is done and dusted, the shareholders will say, "Well that is all very interesting, but actually we like it the way it is — and we’ll stay independent."