November 25, 2011ET.INTL FCStone Agrees to Acquire MF Global's U.K. Metals Team
The metals division of bankrupt broker MF Global Holdings Ltd. has been bought by INTL FCStone (Europe) Ltd., bankruptcy administrator KPMG said.
The deal ends weeks of speculation over the fate of the metals team, one of the largest on the London Metal Exchange floor, which accounts for upward of 10% of exchange metals business, according to estimates by other ring dealing members.
As part of this transaction, the European subsidiary of INTL FCStone, currently a category two member of the LME, has been granted approval to upgrade its membership to a category one ring dealer, giving it the right to trade on Europe's last open outcry trading floor.
Earlier this week, KPMG confirmed the purchase of MF Global's 4.7% stake in the LME by J.P. Morgan Chase & Co., making it the largest shareholder in the exchange. J.P. Morgan is paying £25 million ($) for the 600,000 A shares that MF Global holds in the exchange, and an additional £2 million to purchase MF Global's 25,000 B shares in the exchange.
The A shares entitle J.P. Morgan, also a category one ring-dealing member, to economic and voting rights in the exchange, a position of some significance given the potential upcoming sale of the LME.
One point of discussion surrounding the future of the LME is whether potential new owners would maintain its historic open-outcry trading floor, known as "the ring."
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The purchase of MF Global metals team by INTL FCStone and the firm's subsequent upgrade to category one membership is another "vote of confidence" in the ring, said Robin Bhar, senior metals analyst at Crédit Agricole.
"It remains to be seen once bids for the LME come in whether the ring stays open or not, but with J.P. Morgan increasing its stake in the exchange and a new ring dealer added, this could be seen as a positive for the ring's future," Mr. Bhar said.
INTL FCStone, which provides execution and advisory services in commodities, currencies and international securities—mostly for commercial customers—didn't disclose financial terms of the deal.
The sale safeguards the jobs of all 50 professional staff, who are mostly located in London, with additional teams in New York, Hong Kong and Sydney, KPMG said.
INTL FCStone (Europe) Limited, its wholly owned subsidiary in the United Kingdom, has agreed to acquire the Metals Division of MF Global UK Limited(in special administration). As part of this transaction, INTL FCStone (Europe) has received approval from the London Metal Exchange ("LME") to upgrade its LME Category Two membership to LME Category One ring dealing membership.
The Metals Division, headed by Fred Demler, has more than 50 professional staff based in London, New York, Hong Kong and Sydney, and has long-standing client relationships throughout the world.
The Metals Division is a leading LME ring dealing member providing execution and clearing of LME products and OTC products to assist commercial customers in hedging their price risk in metals markets.
The Metals Division also serves institutional investors and financial services firms in the Americas, Europe, and the Asia-Pacific region. Demler will assume leadership of INTL FCStone's global metals LME futures and derivatives business.
Sean O'Connor, CEO of INTL FCStone, commented, "Fred and his metals team add a well-recognized and leading LME franchise with deep and diverse global relationships to our growing and profitable company.
Our existing significant physical metals, structured OTC products and corporate finance advisory services combined with the LME capabilities and relationships should create a unique metals franchise.
With our unwavering focus on customers, our broad capabilities and our expertise in all commodity verticals, we will now be in a better position than ever before to offer significant value to our global customer base."
"We are all very excited about the acquisition of our global metals team and see INTL FCStone as having a clear focus on serving customers, especially mid-market commercial entities where we have a great footprint globally," added Demler. "INTL FCStone has a strong presence across all the other commodity markets and we believe we can become a leading franchise for them in the broader metals markets. We anticipate a quick transition, which will allow us to continue serving our clients' needs with minimal disruption."
About INTL FCStone Inc.
INTL FCStone Inc. provides execution and advisory services in commodities, currencies and international securities. INTL FCStone's businesses, which include the commodities advisory and transaction execution firm FCStone Group, serve more than 10,000 commercial customers through a network of offices around the world. Further information on INTL FCStone Inc. is available at www.intlfcstone.com.
