Treasury ready to block £32bn LSE takeover

THE Treasure is ready to block the Hong Kong stock exchange’s proposed takeover of London Stock Exchange, the Mail understands.

A source close to Whitehall said officials would intervene in the £32bn deal if it becomes clear that LSE shareholders are likely to back it.

The Government can wade in to potential takeovers – and even block them – if they threaten the national interest. This applies if they encroach on national security, media plurality or the stability of the financial system.

In the case of the LSE, the Government is concerned about national security and the UK’s financial stability. Hong Kong Exchanges and Clearing (HKEX), which wants the LSE, is 6pc-owned by the Hong Kong government.

But the territory, officially part of China though it rules itself, has been rocked by violent pro-democracy protests as citizens worry that Beijing’s Communist regime is tightening its grip. MPs and LSE shareholders have raised fears that selling the LSE could let China exert influence over Britain’s financial system.

As well as providing a platform on which shares and other financial instruments can be traded, the London Stock Exchange Group also runs a major clearing business integral to global markets.

Clearing houses are the middlemen between buyers and sellers on financial trades. Last year, the group cleared more than one thousand trillion US dollars in interest rate derivatives contracts alone.

HKEX’s shock £32bn bid last week has been frostily rebuffed, but the Hong Kong exchange is now appealing directly to LSE shareholders.

Xavier Rolet, former chief executive of the LSE, last week said he expected regulators around the world to be keeping a close eye on the bid.

It would usually fall to the Business Secretary, Andrea Leadsom, to intervene in takeovers. A Government spokesman said: ‘Given the LSE group is a critically important part of the UK financial system, the Government is following the situation closely, and is in touch with both parties.’