The transaction would bring together the world's leading base metals bourse London Metal Exchange (LME) and Hong Kong Exchanges & Clearing Ltd (HKEx).
HKEx would snap up LME in a deal valued at USD 2.16 billion. The development would help the Hong Kong bourse to capitalise on the China-led booming commodities demand.
Hong Kong is a semi-autonomous region under China.
In a statement, HKEx said it along with HKEx Investment (UK) Ltd and LME Holdings Ltd have entered into a framework agreement for the proposed acquisition.
"HKEx Investment will acquire the entire issued and outstanding ordinary share capital of LME Holdings for 107.60 pounds per ordinary share in cash..., it noted.
The funding would be through existing cash resources and new bank facilities of about 1.1 billion pounds.
LME is a major platform for the trading of base metal futures and options contracts, with a global market share of about 80 per cent.
With a market capitalisation of 9.8 billion pounds, HKEx operates two exchanges and three clearing houses covering both cash and derivatives markets.
"The acquisition of LME Holdings represents a unique opportunity for us to acquire in one stroke a position of global leadership in the commodities market," HKEx Chief Executive Charles Li said.
Noting that the buyout offers significant opportunities for revenue growth, Li said the move would also help the LME to grow its business in Asia
"This proposed combination will secure the future of the LME for its next 135 years.
"The LME's global benchmarks plus HKEx's pre-eminent market position in Asia, its IT and trading resources and clearing expertise will cement the LME's position as the world's foremost base metals trading venue," LME Chief Executive Martin Abbott said.
LME board is expected to recommend to its shareholders to approve the deal and meetings in this regard would be convened before July end.