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Hong Kong Exchanges and Clearing (HKex) has defended its purchase price of $2.18 billion for the London Metal Exchange, after some analysts voiced concerns about the amount it was paying.
Shares in HKEx fell 2.7 percent in early trade on Monday after many analysts said its LME deal was expensive, underperforming the benchmark Hang Seng Index's 1.5 percent gain.
HKEx CEO Charles Li told CNBC’s Bernie Lo on Friday he believes the company was paying the “market price” and that people were basing their valuations on the wrong numbers.
“This is a very competitively managed auction process, participated by all the global leaders in the commodity exchange space. So I think the price coming out of that sort of process, I trust, is the market price,” Li said. “The reason it does look pricey is people are trying to use apple and oranges.”
The LME is now a member-owned mutualized exchange and its profit was constrained by its ownership structure, Li said. After the takeover, the HKEx will turn the LME into a commercial enterprise, Li added.
The price that the HKEx is paying for the LME translates to a multiple of 180 times last year’s earnings and 22 times the last traded share price before the announcement, far higher than the one billion pounds that the CEO of LME told CNBC the trading platform could get.
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