Money

HKEX undeterred by LSE rebuff for £32bn bid


Hong Kong Exchanges and Clearing has vowed to press on with its £32bn takeover bid for the London Stock Exchange, even as the UK group flatly rejected the unsolicited approach.

In a dismissive statement on Friday morning, the LSE cited concerns about the feasibility, value and structure of the offer and questioned whether its Asian rival could sustain its position as a “strategic gateway” to China in the face of competition from Shenzhen and Shanghai.

“The board unanimously rejects the conditional proposal and, given its fundamental flaws, sees no merit in further engagement,” the LSE said. 

The Hong Kong exchange retorted that it was disappointed that the London exchange’s board had “declined to properly engage” and would press its case with shareholders. Investor meetings are being arranged for next week.

The tit-for-tat exchange capped a momentous week for the LSE, which was surprised when it received a cash and shares offer worth £83.61 a share from Hong Kong on Monday morning. HKEX went public with it on Wednesday. It now has until October 9 to make a formal offer for the LSE.

HKEX’s bid comes at a time of social upheaval in the Asian financial hub and questions about Hong Kong’s autonomy from China. The territory’s government can appoint seven of HKEX’s 13 board members.

The would-be acquirer faces an uphill battle, with investors demanding more cash but also unconvinced that the UK government would allow a deal to proceed. One top-10 shareholder said: “The price and the mix with shares is too low — the politics are difficult. It’s not credible as it stands.”

The LSE made the most of that uncertainty, telling HKEX: “There is no doubt that your unusual board structure and your relationship with the Hong Kong government will complicate matters. Accordingly, your assertion that implementation of a transaction would be ‘swift and certain’ is simply not credible.”

The Hong Kong exchange is seeking to break up LSE’s $27bn purchase of data and trading group Refinitiv before shareholders vote on the deal at the end of the year. Many investors have backed the strategy to pivot towards data as laid out by David Schwimmer, LSE’s chief executive. 

Charles Li, HKEX’s longstanding chief executive, has argued that his proposal is superior to the Refinitiv deal because it would allow the combined group to benefit from the growing links between China’s capital markets and the rest of the world. Mr Li is trying to make his company a “department store” for investors looking to increase their exposure to China.

Roger Barron, M&A partner at law firm Paul Hastings, said HKEX “must have known an unsolicited wouldn’t have been popular”. That left it with the choice of walking away or appealing directly to shareholders. “You would have to think they’d have the courage of their convictions to take it forward,” he said.

LSE shares closed up 3.6 per cent at £75.14.



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