Hong Kong drops LSE takeover bid

Andrew Cummings
October 8, 2019

Hong Kong Stock Exchange (HKEX) dropped its bid to take over its London rival, the company said in a press release.

The HKEX cash-and-shares bid for LSEG worth £32 billion ($40 billion, 36 billion euros) had been dependent on the axing of the latter's planned acquisition of USA financial data provider Refinitiv for $27 billion.

HKEX, whose biggest shareholder is the Hong Kong government, said in a statement it still believed joining forces with the LSE was "strategically compelling and would create a world-leading market infrastructure group".

LSEG shares slid to stand down 5.2 percent to £70.60 in London afternoon trading.

Hong Kong Exchanges and Clearing Limited (HKEX) made the shock proposal for LSEG on September 11, but LSEG formally rejected the offer the following day citing "fundamental" flaws and concerns over its ties to the Chinese city's government.

One of the conditions of the Hong Kong company's proposed offer had been that LSE needed to drop its plans for a US$27bn merger with USA-based data specialist Refinitiv that the United Kingdom company announced in July. Refinitiv is 45 per cent-owned by Thomson Reuters which owns Reuters News.

"The price tag from the Hong Kong exchange perspective was getting a bit too high, so it's good for the shareholders that they chose to walk away", said Hao Hong, head of research at broker BOCOM International.

HKEX said in a statement Tuesday that it was "disappointed" to pull its bid but that it was in the best interests of shareholders to do so.

When HKEx announced its surprise move, analysts also said the perception that Beijing was exerting growing influence over Hong Kong could become another key sticking point for an LSE takeover by the Hong Kong market operator. "Still, we look forward to next year's attempt". Charles Li has done a lot of deals, most notably the London Metal Exchange.

HKEX had until Wednesday to follow up its initial takeover proposal with a firm bid.

Other reports by iNewsToday