HKEX drops $36.4 billion bid for the LSE

THE DECISION IS A RARE SETBACK FOR HKEX CEO CHARLES LI, WHO HAD A VISION OF LONDON AT THE CENTRE OF TRADING BETWEEN EAST AND WEST

Hong Kong Exchanges & Clearing Ltd said it won’t proceed with its £29.6 billion ($36.4 billion) takeover bid for London Stock Exchange Group Plc, another failed cross-border deal in the exchange sector that ends the Asian bourse’s ambitions to be a link between Europe and China.

The decision is a rare setback for HKEX chief executive officer Charles Li, who had a vision of London at the centre of trading between East and West—with the help of Hong Kong. Instead, Li said on Tuesday that the “vision for the business looking forward is to build upon the role we already play in Hong Kong, China, Asia and more widely”.

Before Tuesday’s aboutface, the region’s largest exchange by revenue had been attempting to regain momentum after last month’s stinging rebuke from LSE’s board. HKEX executives met LSE shareholders in London and New York to try to gain their backing for the takeover plan. The bourse also was in talks to borrow as much as £8 billion to fund the purchase.

While the HKEX’s board continues to see a combination as “strategically compelling,” it’s “disappointed that it has been unable to engage with the management of LSEG in realizing this vision, and as a consequence has decided it is not in the best interests of HKEX shareholders to pursue this proposal,” the exchange said in a filing on Tuesday.

With the takeover offer pulled, “HKEX should resume its focus on strategic initiatives linking mainland China’s capital markets with Hong Kong,” Bloomberg Intelligence analyst Sharnie Wong said in a research report Tuesday morning.

Li’s LSE counterpart, David Schwimmer, has said he preferred direct access to China and didn’t need the former British colony as a conduit. LSE last month rejected HKEX’s initial takeover proposal, citing complications ranging from political unrest in Hong Kong to potential problems with regulators.

HKEX countered with a charm offensive, bringing in UBS Group AG and HSBC Holdings Plc to try to persuade shareholders of the merits of its proposal.