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Hong Kong bourse drops £32 billion bid for London Stock Exchange

By Asia Asset Management  
October 9, 2019

Hong Kong’s stock exchange operator has scrapped its plan to acquire the London Stock Exchange (LSE), less than a month after making an unsolicited £32 billion (US$39 billion) bid for the London bourse.

According to Hong Kong Exchanges and Clearing (HKEX), it was unable to “engage with the management” of LSE’s parent, the London Stock Exchange Group (LSEG), to realise its “vision” of a deal.

When HKEX launched its bid on September 11, it said a merger with the LSEG would be “strategically compelling and would create a world-leading market infrastructure group”.

“Despite engagement with a broad set of regulators and extensive shareholder engagement, the Board of HKEX is disappointed that it has been unable to engage with the management of LSEG in realising this vision,” HKEX says in a statement on October 8.

HKEX’s bid was subject to the LSE succeeding in its planned £22 billion acquisition of UK financial data provider Refinitiv.

Although HKEX’s bid was rejected immediately, the Hong Kong bourse had vowed to press ahead with its plan, with Chief Executive Charles Li claiming that the proposal was “superior to the Refinitiv deal”.

Reuters on October 4 cited three LSE shareholders as saying that HKEX would have to increase its bid by 20% for them to take it seriously.

That’s “too high” a price for HKEX, according to Terence Chong, associate professor of economics and executive director of Hong Kong-based Lau Chor Tak Institute of Global Economics and Finance.

“It’s widely expected that the deal will eventually fall through as HKEX is unlikely to raise the ante to meet the threshold,” Mr. Chong tells Asia Asset Management (AAM).  

Ronald Wan, chief executive of investment banking at Hong Kong asset management firm Partners Financial Holdings, believes HKEX’s offer was not made at the “right time”.

“Unlike HKEX acquiring the London Metal Exchange seven years ago, LSE’s business involves a lot of national security information. Also, the social unrest in Hong Kong makes [LSE shareholders] more cautious about the deal,” Mr. Wan tells AAM.

HKEX acquired the London Metal Exchange, the world’s largest metal trading centre, for $2.2 billion in 2012.

LSE’s share price fell more than 6% to £69.7 when the London market opened for trading on October 8.