London Stock Exchange rejects Hong Kong’s takeover offer
LONDON — The London Stock Exchange
The Hong Kong exchange will now likely have to go hostile and present a better offer directly to LSE shareholders if it wants to keep alive its hopes of becoming a more global player to rival U.S. giants ICE
The LSE told HKEX in a letter that it had fundamental concerns about key aspects of the proposal which it said had no strategic merit, and that HKEX’s relationship with the Hong Kong government would “complicate matters”.
HKEX’s valuation of the LSE falls “substantially short” and the “ongoing situation in Hong Kong” adds to uncertainty for shareholders, the London bourse added, a reference to weeks of prodemocracy street protests in the former British colony.
“Accordingly, the board unanimously rejects the conditional proposal and, given its fundamental flaws, sees no merit in further engagement,” the LSE said in a statement.
HKEX, Hong Kong Exchanges and Clearing <0388.HK>, had no immediate comment.
LSE shares rose on the news of the offer rejection and were trading up 3.3% at at 7,486 pence at 1405 GMT.
LSE’s blunt rejection letter said the Hong Kong offer did not meet its strategic objectives. It said it was sticking with its core strategy of expanding into data with the $27 billion Refinitiv deal, rather than taking a “significant backward step” by bulking up on market transactions in the HKEX proposal.
HKEX’s surprise takeover offer, made on Wednesday, had required the London exchange to ditch the Refinitiv acquisition.
The LSE also said a Hong Kong takeover could well be rejected by regulators or governments in Britain, the United States and Italy. HKEX’s assertion that implementing the deal would be swift and certain “is simply not credible”, it added.
The London course also owns the Milan exchange and has a significant American presence through its FTSE Russell index subsidiary and LCH, its derivatives clearing house which dominates the U.S. dollar swap market.
HIGHER OR HOSTILE?
The flat rejection indicates HKEX boss Charles Li is unlikely to win the LSE board round with an improved financial offer, meaning if he wants to take it further he may have to go hostile.