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London Stock Exchange rejects o32bn Hong Kong takeover bid
LONDON, Sept 14, 2019 (BSS/AFP) – The London Stock Exchange Group on
Friday turned down a takeover bid by the Hong Kong Stock Exchange, citing
“fundamental” flaws and concerns over its ties to the Hong Kong government.
In a statement, LSEG said management “unanimously rejects the conditional
proposal” from Hong Kong Stock Exchange (HKEX) and “given its fundamental
flaws, sees no merit in further engagement” regarding the offer worth almost
o32 billion ($40 billion, 36 billion euros).
“There is no doubt that your unusual board structure and your relationship
with the Hong Kong government will complicate matters,” LSEG told HKEX bosses
in a letter published alongside the rejection statement.
Analysts said the LSEG had been “spooked” by recent pro-democracy protests
in Hong Kong.
The owner of the London and Milan stock exchanges added Friday that it
“remains committed to and continues to make good progress on its proposed
acquisition” of US financial data provider Refinitiv.
The HKEX on Wednesday said its cash and shares offer for LSEG was
conditional on terminating the Refinitiv deal.
– Bid falls ‘substantially short’ –
The British company on Friday said that the offer “falls substantially
short of an appropriate valuation for a takeover”.
The letter added that a tie-up with HKEX “would represent a significant
backward step for LSEG strategically”, while the British group expects to
create “significant value” from its purchase of Refinitiv.
The HKEX had argued on Wednesday that a deal would create a combined group
“ideally positioned to benefit from the evolving global macroeconomic
landscape, connecting the established financial markets in the West with the
emerging financial markets in the East, particularly in China”.
In response, LSEG said Friday that it recognised “the scale of the
opportunity in China and value greatly our relationships there.
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“However, we do not believe HKEX provides us with the best long-term
positioning in Asia or the best listing/trading platform for China.
“We value our mutually beneficial partnership with the Shanghai Stock
Exchange which is our preferred and direct channel to access the many
opportunities with China,” the letter said.
The takeover bid came one month after the LSEG embarked on a huge deal to
acquire Refinitiv, a move that would create a market information giant to
rival US titan Bloomberg.
The Refinitiv deal comes two years after LSEG’s failed o21-billion merger
with Germany’s Deutsche Boerse.
That proposal — the third failed attempt at a tie-up between the British
and German stock exchange operators — was blocked by the European Commission
on competition fears.
– ‘Spooked’ by current climate –
In late afternoon deals, LSEG shares rallied 3.28 percent to o74.90 on
investor relief.
The benchmark FTSE 100 index, on which it is listed, won 0.2 percent in
value heading into the weekend.
“The LSEG … said HKEX’s relations with the Hong Kong government would
‘complicate’ matters,” CMC Markets David Madden told AFP.
“It seems that the current climate in Hong Kong is a major factor in the
rejection of the bid.
“At the moment Hong Kong is not exactly saying they are open for
international business, and that seems to have spooked LSEG.”
BSS/AFP/HR/1045