Shares of Hong Kong Exchanges fell 4.5% on Monday as investors reacted warily to news that the bourse had struck a US$2.2 billion merger deal with the London Metal Exchange, Bloomberg reported. Analysts generally expect regulators to approve the takeover, provided shareholders approve and the UK’s Financial Services Authority (FSA) maintains oversight of day-to-day operations. However, the Hong Kong exchange came under fire for the high price of its offer, which values the LME at around 180 times trailing net income – making it the most expensive exchange deal above US$1 billion since at least 2000. The offer price is “extremely expensive,” according to Anil Agarwal and Isabella He of Morgan Stanley. Hong Kong Exchanges said it plans to increase transaction fees at the LME, which were kept low in the past to benefit members.
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