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HKEX drops bid for London Stock Exchange

The Hong Kong exchange said it still believes a merger is “strategically compelling” but said the LSE board had refused to engage

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The owner of Hong Kong stock exchanges has pulled its takeover bid for the London Stock Exchange Group PLC (LON:LSE) a day before the deadline for a formal bid.

Hong Kong Exchanges and Clearing (HKEX) said in a statement on Tuesday morning that it “does not intend to make an offer”.

HKEX, which last month proposed offering LSE shareholders a mix of 2.045p cash and 2.495 HEKX shares for each share, added that it still believes a merger is “strategically compelling” but said the LSE board had refused to budge.

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 UK company announced in July.

The LSE rejected HKEX's bid, citing “fundamental concerns” about the terms of the offer, including various “flaws” such as “strategy, deliverability, form of consideration and value”.

In its statement of defeat on Tuesday, HKEX said: “Despite engagement with a broad set of regulators and extensive shareholder engagement, the board of HKEX is disappointed that it has been unable to engage with the management of LSEG in realising this vision, and as a consequence has decided it is not in the best interests of HKEX shareholders to pursue this proposal.”

LSE issued its own statement later in the morning, assuring that it "remains committed" to the Refinitiv deal, where it is making "good progress" with regulatory approval processes underway.

Approval will be sought from shareholders for the Refinitiv deal in a vote in November, with LSE aiming to complete the deal in the first half of next year.

Who's next?

LSE shares were down almost 6% to 7,020p by mid-morning.

“Another year another failed bid for the LSE,” sighed market analyst Jasper Lawler at LCG. “Still, we look forward to next year’s attempt.”

After the past two decades have seen takeover attempts by Nasdaq and ICE, Macquarie and Deutsche Boerse, Russ Mould, AJ Bell investment director, said the news “hardly qualifies as ‘human bites dog’...rather it is much more along the lines of ‘small earthquake in Chile, no-one injured,’.”

He said the UK Government and the authorities in the City “may well have looked askance at the prospect of Chinese influence over the LSEG, given China’s influence over HKEx, since the Hong Kong government appoints more than half of HKEx’s board” and that the ongoing protests in Hong Kong raised the stakes even further.

 

Quick facts: The London Stock Exchange Group PLC

Price: 6794 GBX

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