LONDON, Sept 18, 2019 (BSS/AFP) – The Hong Kong Stock Exchange needs to
stump up more cash to clinch a takeover of the prized London Stock Exchange
Group — but still faces an uphill battle, investors say.
The Hong Kong Stock Exchange (HKEX) last week unveiled a shock cash-and-
shares bid which was worth o32 billion ($40 billion, 36 billion euros) and
dependent on the axing of LSEG’s proposed purchase of US financial data
provider Refinitiv.
However, the owner of the London and Milan stock exchanges has unanimously
rejected the bid as too low, arguing it remains committed instead to its
takeover of Refinitiv for $27 billion, while also citing concerns over HKEX
ties to the Hong Kong government.
HKEX responded by indicating that it could go hostile, bypassing
management and taking its proposal direct to shareholders — but the price is
critical.
“The London Stock Exchange board of directors have given a very long list
of why it is not interested,” in the HKEX bid, said Iacopo Dalu, research
analyst at LSE minority investor Janus Henderson investment fund.
“One of them is the price,” he told AFP.
Another minority shareholder has not ruled out the HKEX takeover but
remains similarly unconvinced.
“The market is disappointed with the cash component,” said Guy de Blonay,
fund manager for the Jupiter Financial Innovation Fund.
“The only answer is to improve the price,” he told AFP.
Shares have meanwhile held stubbornly below the bid which stands at more
than o83 per share.
In late afternoon deals on Tuesday, LSEG stock fell 0.5 percent to stand
at o73.66 on London’s FTSE 100 index, which was 0.4 percent lower.
“If LSEG investors felt that a new bid was coming the share price would
probably be higher,” noted CMC Markets analyst Michael Hewson.
The LSEG has insisted that it remains committed instead to its
transformational Refinitiv deal.
Refinitiv will help shift LSEG from generating revenue solely from the
trading of securities to providing investors information about trading, which
will put it in direct competition with data and financial news firm
Bloomberg.
“The more I look at this (HKEX) deal and the more I think what is the
point,” added Hewson.
“HKEX probably needs the deal more than the LSE, and why would LSE
shareholders want to give up on the Refinitiv deal which appears to be a
decent fit.
“The regulatory hurdles to a successful tie-up are also quite high. For
me, this deal seems doomed to fail, given the Chinese appear opposed to it as
well.”