Hong Kong must stump up £4bn more to buy LSE

THE Hong Kong stock exchange is under pressure to find another £4 billion to convince London Stock Exchange investors to back its takeover bid, it has emerged.

Leading shareholders have told The Mail on Sunday that the Hong Kong Exchange and Clearing (HKEX) must sweeten its cash and shares offer, which has already been hobbled by a slump in its share price. HKEX indicated last month it may offer £83 per share – valuing the business at £29.6 billion – but the approach was rebuffed by the LSE board. HKEX has until Wednesday to table a formal offer or walk away.

The current offer is backed by more than £ 22 billion of HKSE shares. But a slide in the share price, which has already left a £1.7 billion hole in the funding, and hardnosed demands from LSE investors for more money means HKEX chief executive Charles Li will need to dig deep to win support.

Investors told The Mail on Sunday they would not relinquish control for less than £90 a share. That is 22 per cent higher than the LSE’s current share price of £73.80.

The investors said they were braced for HKEX to improve its offer after Li made clear his determination to conclude a deal.

One shareholder said: ‘I believe the chief executive doesn’t take no as an answer. He would want to show a bit of resilience. The offer has to be significantly higher. The Hong Kong stock exchange has understood that a better headline price has to be offered.’

Li’s proposal has so far been poorly received by the LSE board because it would scupper its plan to buy data firm Refinitiv for £22 billion from private equity firm Blackstone.

LSE boss David Schwimmer said last month he wants to push ahead with the bid for Refinitiv, which provides trading screens. But investors said Li’s representatives had made persuasive arguments in private meetings. HKEX has pointed out that the Refinitiv deal will leave the LSE saddled with debt. In addition, HKEX has said a Hong Kong tie-up will give even greater access to Chinese markets than the LSE’s existing arrangements.

Concerns that China is exerting growing influence over Hong Kong has been central to fears surrounding the bid. Six of the company’s 13 directors are appointed by Hong Kong’s government, which is the biggest investor with 6 per cent.

LSE’s shareholders said the Hong Kong exchange, which is willing to shake up its board, must take steps to address fears about China. This could include adding LSE directors to HKEX’s board and establishing a dual listing in London to ensure regulatory scrutiny in the capital.

HKEX and the LSE declined to comment.