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Hong Kong’s Stock Exchange drops bid for its London counterpart

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(AFP) – The Hong Kong Stock Exchange yesterday dropped its multibillion-dollar takeover bid for the prized London Stock Exchange Group, which would have created a global markets titan.

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

The huge cash-and-shares bid, which was worth £32 billion ($40 billion), was dependent on the axing of LSEG’s planned purchase of US financial data provider Refinitiv.

HKEX chairman Laura Cha said at the time of the offer that it represented a “compelling” opportunity and would bring together the largest and most significant financial centres in Asia and Europe.

However, the owner of the London and Milan stock exchanges unanimously rejected the bid, saying it fell “substantially short of an appropriate valuation for a takeover”. It also argued it remained committed instead to its $27 billion acquisition of Refinitiv.

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

“The board of HKEX continues to believe that a combination of LSEG and HKEX is strategically compelling and would create a world-leading market infrastructure group,” the statement added.

“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.”

Shares in Hong Kong Exchanges and Clearing rose almost 3 percent yesterday. Chief executive Charles Li said in a blog: “I need to be rooted in our day-to-day business but forward-focused, certain that if we try something and it doesn’t work, we are strong enough and diverse enough to dust ourselves down and move forward. We are honest with ourselves too – as we know some things we try will not develop at the speed which we would like, or in some cases, at all. Our goal is to keep moving forward, reinforcing HKEX’s role and building Hong Kong’s strength as a financial market.”

Hong Kong lawmaker and HKEX shareholder Christopher Cheung criticised the unsolicited takeover bid, telling Bloomberg News the “whole offer was a farce”.

“When HKEX announced the offer, I thought they’ve already had discussions with London Stock Exchange and their regulators. It turns out they have not. HKEX now must address the danger of stagnant business growth.”

Almost half of HKEX’S board is appointed by the Hong Kong government, which has faced pro-democracy protests in recent months that have turned increasingly violent on both sides.

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