ICE to Buy Singapore Mercantile Exchange for $150 Million

November 20, 2013 Leave a comment

ICE to Buy Singapore Mercantile Exchange for $150 Million

IntercontinentalExchange Group Inc. (ICE) agreed to buy Singapore Mercantile Exchange Pte for $150 million to add commodity futures trading in Asia, where China reigns as the biggest user of everything from energy to metals. Atlanta-based ICE will buy the exchange operator and Singapore Mercantile Clearing Corp. from Financial Technologies (FTECH) India Ltd., the Mumbai-based company said today in a statement.The acquisition will help ICE, led by Chief Executive Officer Jeffrey Sprecher, expand its revenue sources to offset falling profits from traditional U.S. equity trading. Financial Technologies will use the proceeds to repay debt after regulators shut down a spot commodity exchange it ran in India.

“SMX has its own clearing house and a trading license, which would offer a great opportunity for any North American or European operator looking to set up in Asia,” said Thomas McMahon, former CEO of Singapore Mercantile Exchange. Obtaining such trading licenses in Singapore typically takes 18 to 24 months, McMahon said.

Shares of Financial Technologies jumped as much as 11 percent to 201.50 rupees ($3.25) in Mumbai. They were trading up 2.8 percent at 186.10 rupees as of 3:03 p.m., paring losses this year to 84 percent. ICE closed up 0.4 percent at $203.17 yesterday in New York, taking its market value to $23.4 billion.

The National Spot Exchange Ltd., an Indian spot trading platform controlled by Financial Technologies, suspended trading on July 31 after the government sought details on its settlement cycle. The exchange broke rules by permitting the sale of goods traders didn’t keep in its warehouses, according the country’s commodities futures market regulator.

Selling Assets

Financial Technologies also owns a 26 percent stake in India’s biggest platform for commodities, Multi Commodity Exchange of India Ltd., as well as the Global Board of Trade in Mauritius, Bourse Africa in Botswana and Dubai Gold & Commodity Exchange.

“They have to sell whatever they can,” Kishor Ostwal, managing director at CNI Research Ltd. in Mumbai, said in a telephone interview. “I don’t think they have any option.”

SMX, started in August 2010, lists futures of gold, silver, industrial metals and currencies. It recorded $134 billion of cumulative trading volume by the end of last year, according to its website.

The company’s loss for the 12 months through March shrank to $16.6 million, from $20.6 million a year earlier, according to a statement previously posted on its website.

ICE last week completed its acquisition of NYSE Euronext, the 221-year-old exchange operator, for $10.9 billion in cash and stock. The combined entity needs to act more like a startup and move quickly to compete, Sprecher said Nov. 12.

Hong Kong Exchanges & Clearing Ltd., which completed a $2.2 billion acquisition of the London Metal Exchange Ltd. in December, has said it plans to expand the commodities marketplace in China. CME Group Inc., the world’s largest futures exchange, said in September it aims to boost its headcount in Asia by as much as 27 percent by next year as trading increases.

To contact the reporters on this story: Joyce Koh in Singapore at jkoh38@bloomberg.net; Chanyaporn Chanjaroen in Singapore at cchanjaroen@bloomberg.net

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Kee Koon Boon (“KB”) is the co-founder and director of HERO Investment Management which provides specialized fund management and investment advisory services to the ARCHEA Asia HERO Innovators Fund (www.heroinnovator.com), the only Asian SMID-cap tech-focused fund in the industry. KB is an internationally featured investor rooted in the principles of value investing for over a decade as a fund manager and analyst in the Asian capital markets who started his career at a boutique hedge fund in Singapore where he was with the firm since 2002 and was also part of the core investment committee in significantly outperforming the index in the 10-year-plus-old flagship Asian fund. He was also the portfolio manager for Asia-Pacific equities at Korea’s largest mutual fund company. Prior to setting up the H.E.R.O. Innovators Fund, KB was the Chief Investment Officer & CEO of a Singapore Registered Fund Management Company (RFMC) where he is responsible for listed Asian equity investments. KB had taught accounting at the Singapore Management University (SMU) as a faculty member and also pioneered the 15-week course on Accounting Fraud in Asia as an official module at SMU. KB remains grateful and honored to be invited by Singapore’s financial regulator Monetary Authority of Singapore (MAS) to present to their top management team about implementing a world’s first fact-based forward-looking fraud detection framework to bring about benefits for the capital markets in Singapore and for the public and investment community. KB also served the community in sharing his insights in writing articles about value investing and corporate governance in the media that include Business Times, Straits Times, Jakarta Post, Manual of Ideas, Investopedia, TedXWallStreet. He had also presented in top investment, banking and finance conferences in America, Italy, Sydney, Cape Town, HK, China. He has trained CEOs, entrepreneurs, CFOs, management executives in business strategy & business model innovation in Singapore, HK and China.

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