Caixin
Oct 08, 2019 08:39 PM
FINANCE

Hong Kong Bourse Operator Drops Bid for London Stock Exchange

Hong Kong Exchanges & Clearing Ltd. on Sept. 16, 2019. Photo: VCG
Hong Kong Exchanges & Clearing Ltd. on Sept. 16, 2019. Photo: VCG

The operator of Hong Kong’s stock exchange has abandoned its efforts to take over the London Stock Exchange Group (LSE), withdrawing before a Wednesday deadline requiring it to put forward a full, formal offer.

The unsolicited bid, which was first announced on Sept. 11 and valued the LSE at £29.6 billion ($36.2 billion), had been rejected outright by the board of the London exchange which said it saw “no merit” in holding talks over the deal. Hong Kong Exchanges & Clearing Ltd. (HKEx) said on Tuesday that despite discussions with regulators and shareholders, it had been unable to “engage” with the management of the bourse to realize its vision of creating a “world-leading market infrastructure group.”

As a result, it had decided not to proceed with the proposal in the best interest of shareholders, HKEx said in an announcement. Even so, “we still believe the strategic rationale for the combination of our two businesses is compelling and would create a world-leading market infrastructure group,” HKEx’s Chief Executive Charles Li wrote on his blog.

HKEx’s spokesperson declined to comment further on the specifics of the company’s negotiations with the LSE or on the details of the acquisition. HKEx’s shares, which have dropped from HK$246 ($31.4) since the bid was made, closed 2.3% higher on Tuesday at HK$231.2 after news of the bourse’s withdrawal was announced.

HKEx had offered to pay 83.61 pounds for each LSE share in cash and stock, a premium of 22.9% to the London bourse’s share price at the close of trading the previous day. The offer was made on the condition that the LSE drop its plan to buy financial information provider Refinitive Holdings Ltd.

No connection

Responding to the offer the same day, the LSE said the deal was “unsolicited, preliminary and highly conditional” and officially rejected it two days later. The LSE said in a statement that HKEx’s approach had problems in its “strategy, deliverability, form of consideration and value.”

The LSE said it was also concerned that a takeover would affect its existing partnership with the Shanghai Stock Exchange (SSE), which the firm said was its “preferred and direct channel to access the many opportunities with China”.

The Shanghai-London Stock Connect Program was launched on June 17, allowing certain companies listed on either bourse to issue depositary receipts on the other. So far, only one company has listed through the program – Chinese brokerage Huatai Securities Co. Ltd., which raised $1.54 billion in June from the sale of global depositary receipts in London.

HKEx is the world’s third-largest exchange operator in terms of market capitalization, and its combination with the LSE would have created a mega exchange group worth more than $70 billion. HKEx operates the stock connect programs between Hong Kong and the Shanghai and Shenzhen exchanges, and a bond connect program that allows overseas investors to buy mainland bonds. It also owns the London Metal Exchange, which it bought in 2012 for 1.4 billion pounds.

Contact reporter Liu Jiefei (jiefeiliu@caixin.com)

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