UPDATE 2-JP Morgan agrees to buy all MF Global's LME shares-KPMG

Wed Nov 23, 2011 1:57pm EST

* LME shares drew 'great deal of interest'

* Sale to J.P. Morgan in final stages

* Process to sale other parts of MF Global 'continues apace'

By Susan Thomas

LONDON, Nov 23 (Reuters) - J.P. Morgan has agreed to buy all of defunct U.S. brokerage MF Global's shareholding in the London Metal Exchange after a competitive bidding process, KPMG, the administrators for MF Global's UK unit, said on Wednesday.

KPMG did not give a price for the sale.

J.P. Morgan already has a 6.2 percent stake in the LME, the world's largest metals market place, which has opened its doors to potential suitors. Increasing its stake alters the landscape, as LME shareholders seek to protect their interests, or make a profit, in any eventual takeover.

"We received a great deal of interest in the LME shares and are pleased to be in the final stages of concluding a sale," said Richard Heis, joint special administrator of MF Global UK.

Sources told Reuters on Tuesday that J.P. Morgan would pay 25 million pounds ($39 million) for the 4.7 percent stake in the LME, implying a total value of around 530 million pounds.

"It's a good price that they've paid," a source at a shareholder company said. "The question is are they looking at trying to make a quick profit or is it a much longer-term investment?"

The LME had been due to open its books to potential bidders by Dec. 8, a spokesperson for the exchange said earlier. But a source close to the LME later said this now seemed ambitious, and that the date could be pushed back.

Goldman Sachs is also a large shareholder in the LME. Contenders for the 134-year old group are the Chicago Mercantile Exchange CME.O and the IntercontinentalExchange ICE.N energy market, both U.S. groups.

B-SHARES

KPMG said J.P. Morgan will also buy the B-shares held by MF Global. Those would be bought for 2 million pounds, one of the sources said on Tuesday.

B-shares give holders the right to trade on the LME and can be sold separately to other members of the exchange. J.P. Morgan already holds B-shares, and it was unclear what would happen to the new shares it would now acquire.

The LME stake sale, though, could leave more money for MF Global creditors.

KPMG's Heis said the process to sell other parts of MF Global's UK business "continues apace and we are in negotiations with several parties to this end".

A spokesman for KPMG said there were no further details.

Industry sources told Reuters last week that MF Global's ring dealing seat on the LME will be bought by U.S.-based broker INTL FCStone, although no price was given.

An industry source said on Wednesday MF Global's shares and the ring dealing seat had been treated as separate assets. J.P. Morgan already has a ring dealing seat on the LME.

Heis also said KPMG had prepared a timeline for the return of client assets and funds.

MF Global filed for Chapter 11 protection on Oct. 31 after the New York-based company revealed it had made a $6.3 billion bet on European sovereign debt.

The revelation worried investors, credit rating agencies and trading partners, and resulted in a liquidity crunch.

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