HKEx bids RM163b to take over LSE

The proposed cash-and-share transaction will only go ahead if the LSE’s takeover of Refinitiv does not proceed, says HKEx

by REUTERS/ pic by BLOOMBERG

LONDON • Hong Kong Exchanges and Clearing Ltd (HKEx) has made an unsolicited US$39 billion (RM163.02 billion) takeover bid for the London Stock Exchange Group (LSE), an offer contingent on the LSE ditching its acquisition of data company Refinitiv.

The combination would help both exchanges compete better with rivals like Intercontinental Exchange and CME Group Inc from the US. The LSE has long sought to bolster its presence in Asia and recently launched a link scheme with HKEx rival Shanghai.

“The board of HKEx believes a proposed combination with LSE represents a highly compelling strategic opportunity to create a global market infrastructure leader,” the HKEx said in a statement yesterday.

In response to HKEx’s announcement, the LSE said it was committed to and continued to make good progress on its proposed acquisition of Refinitiv.

The takeover bid by the Hong Kong company comes as Britain is set to leave the European Union, a step some politicians fear could weaken its large financial sector.

HKEx, which already has a base in London as owner of the London Metal Exchange (LME), said it had played a key role in underpinning the City of London’s position as a pre-eminent global centre for metals trading.

“HKEx is fully committed to supporting and building the long-term roles of both London and Hong Kong as global financial centres,” it added.

The proposed £31.6 billion (RM163.06 billion) cash-and-share transaction would only go ahead if the LSE’s proposed takeover of Refinitiv does not proceed, HKEx said.

The LSE announced in August that it has agreed to buy Refinitiv in a US$27 billion deal aimed at transforming the exchange into a market data and analytics giant.

Refinitiv declined to comment. Its majority shareholder Blackstone Group Inc had no immediate comment, while minority shareholder Thomson Reuters Corp declined to comment.

Reuters news agency is a unit of Thomson Reuters. The bid for the LSE comes at a time when HKEx is beset by political turmoil. Pro-democracy protesters lit fires and vandalised a metro station near the exchange on Saturday as increasingly violent clashes with police move into their fourth month.

“This is not helpful. As a financial centre, trust and confidence are important,” HKEx CEO Charles Li said of the protests last month, when HKEx reported a 21% fall in trading fees in the first half of the year.

A top-10 shareholder in the LSE, who declined to be named in line with his company’s policy during potential mergers, sounded a cautious note about the prospects of a successful takeover of the exchange.

“HKEx bought LME a few years ago, so they have a presence in the UK already, but clearly they are trying to diversify away from their Chinese exposure, which is why they are bidding now and not nine months ago,” he said.

“Shareholders won’t be rushed to make a decision as we like the Refinitiv deal,” he added.

“The share price reaction one hour after the approach said the market does not believe it will be successful.”

Shares in LSE, which were trading more than 17% higher in reaction to the news at 0834 GMT (4:34pm yesterday in Malaysia, were trading 4.5% higher at 1010 GMT. It is expected that key LSE management would continue to operate LSE businesses, HKEx said.

The Hong Kong approach is the latest international attempt to acquire the LSE — Germany’s Deutsche Boerse has failed three times in recent years, hitting opposition from politicians and regulators.

LSE CEO David Schwimmer has said that big bang takeovers in exchanges are difficult due to political concerns and in recent years, the LSE has sought to diversify away from basic trading and clearing to data and analytics.

The Asian exchange, however, signalled it was confident the takeover faced no major regulatory hurdles due to little overlap in markets.

HKEx said it has already begun discussions with certain regulators in Britain and Hong Kong.

“The board of HKEx believes that the two businesses are highly complementary and as such, looks forward to working with the relevant authorities to deliver a clear path to completion,” it added.

HKEx said under the terms of the deal, LSE shareholders would receive 2,045 pence (RM105.50) in cash and 2.495 newly issued HKEx shares.

Laura Cha, chairman of HKEx, said the combination of the two exchanges represents a “highly compelling strategic opportunity”.

HKEx said it intended to apply for a secondary listing of its shares on the LSE once the deal has gone through. — Reuters