By Jacob Bunge IntercontinentalExchange Inc. (ICE) could return hundreds of millions of dollars in excess cash to its investors after the derivatives market operator on Friday lost a bidding battle to acquire the London Metal Exchange, according to analysts. Shares of ICE climbed on the news that Hong Kong Exchanges & Clearing Ltd. (0388.HK) secured a deal to buy the LME for about $2.15 billion after a protracted bidding process that ended Friday. ICE stock recently was 4.4% higher at $134.49 after trading at nearly $136 earlier, its highest level in more than a month. "We could see ICE returning [about] $500 million in capital, which could fund a $7 one-time dividend or buy back 5% of shares," wrote Ed Ditmire, analyst for Macquarie Securities, in a research note Friday. A spokeswoman for ICE declined comment. The company had not confirmed it was in the running to buy the LME. ICE's deals team meets every two weeks to evaluate potential acquisitions, and the company has been among the most active dealmakers in the exchange sector. In recent years ICE has purchased Climate Exchange plc, the Clearing Corp. and the New York Board of Trade as a means of adding new products and services. The Atlanta-based company has about $1 billion in cash on hand, according to analysts. Some of that ICE needs to hold for regulatory reasons related to its business of processing customers' trades, but ICE executives have said the company likely will return some of the remainder if they cannot find sensible ways to spend it. "We're starting to see some downside pricing pressure on certain public companies," ICE Chief Executive Jeff Sprecher had said on a conference call last month discussing first-quarter results. "We would like to be opportunistic if those opportunities come along; otherwise, we will return the capital." A special dividend of roughly $9.56 per share or a buyback representing about 8% of ICE's float are possible should ICE decide to hand cash back to its investors, Evercore Group analyst Chris Allen told clients in a research note Friday. "We would not be surprised to see a return of capital, although ICE would probably retain some excess cash flexibility in case another opportunity appeared," Allen wrote. Losing a protracted bid battle for the LME adds to the list of sometimes daring but ultimately unsuccessful deals pursued by ICE. The company earned renown for its uninvited bids to buy the Chicago Board of Trade and the derivatives business of NYSE Euronext (NYX), the latter part of a joint effort with Nasdaq OMX Group Inc. (NDAQ). CME Group Inc. (CME) wound up with the CBOT and the effort to acquire the Big Board parent drew opposition from U.S. antitrust regulators. -Write to Jacob Bunge at jacob.bunge@dowjones.com
