LSE rejects Hong Kong's $39b offer

The London Stock Exchange emphatically rejected the Hong Kong bourse's $39 billion takeover offer on Friday, opting to stick with its planned purchase of data and analytics group Refinitiv.

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 US giants ICE and CME.

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 pro-democracy 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, had no immediate comment. LSE shares rose on the news of the offer rejection and were trading up 3.3 per cent at 7,486 pence at 1405GMT.

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.