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Hong Kong Exchange makes US$39 billion bid for London Stock Exchange

By Asia Asset Management  
September 13, 2019

Hong Kong’s stock exchange operator has launched an unsolicited US$39 billion bid for the London Stock Exchange (LSE), seven years after acquiring the London Metal Exchange, the world’s largest metal trading centre, for $2.2 billion.

The offer is subject to LSE succeeding in its planned $27 billion acquisition of UK financial data provider Refinitiv, the Hong Kong Exchange and Clearing (HKEX) says in a statement on September 11.

LSE said last month that it was acquiring Refinitiv from a consortium led by US private equity firm Blackstone.

HKEX describes its potential merger with the Board of London Stock Exchange Group (LSEG), LSE’s parent, as “a highly compelling strategic opportunity to create a global market infrastructure group, bringing together the largest and most significant financial centres in Asia and Europe”.

“Bringing HKEX and LSE together will redefine global capital markets for decades to come. Both businesses have great brands, financial strength and proven growth track records,” HKEX Chief Executive Charles Li says in the statement.

The price offered by HKEX translates into a 23% premium over LSE’s closing price of £68.04 ($83.9) on September 10.

LSE responded by saying the LSEG board “will consider this proposal”.

“LSEG remains committed to and continues to make good progress on its proposed acquisition of Refinitiv Holdings,” LSE says in a statement on September 11.

LSEG shareholders will vote on the Refinitiv deal in November.

Analysts are doubtful that the Hong Kong exchange will succeed in taking over its London counterpart.

Ronald Wan, chief executive of investment banking at Hong Kong’s Partners Financial Holdings, says LSE’s shareholders and board are unlikely to approve the plan.

“The UK financial regulator will [also] be very careful on the transaction as [LSE’s operations] involve a lot of national security information,” Mr. Wan tells Asia Asset Management (AAM).

According to a Hong Kong-based equity analyst, LSE shareholders are likely to support the Refinitiv acquisition but a merged LSE and Refinitiv would be “too large” for HKEX to acquire.

The Hong Kong exchange’s offer will also face regulatory challenges in the UK because global regulators are increasingly concerned about market monopoly, the analyst tells AAM, speaking on condition of anonymity.

Fitch Ratings says in a report on September 12 that revenue synergies for a merger between HKEX and LSE could be “modest” because of their limited geographical and product overlap.