LSE rebuffs takeover bid from Hong Kong exchange citing ‘fundamental flaws’

London Stock Exchange mentions protests in Hong Kong among reasons for rejection and says it sees no merit in further talks

The London Stock Exchange Group has soundly rejected a £32bn takeover bid from its Hong Kong counterpart, listing a host of reasons including the protracted protests in Hong Kong.

Hong Kong Exchanges and Clearing (HKEX) surprised markets on Wednesday by announcing that it had offered to buy the London group. Analysts said it is likely the move was partly driven by the weakness of the pound.

The board of the London Stock Exchange (LSE) Group responded to the approach on Friday, four days after receiving it, saying it “unanimously rejects the conditional proposal and, given its fundamental flaws, sees no merit in further engagement”.

In a letter to HKEX, the LSE wrote that it does not see strategic merit for the group in the tie-up, and that regulatory and government support for the deal is “highly uncertain”.

Will Howlett, an analyst at Quilter Cheviot, echoed these doubts in a comment on the HKEX’s proposal. He noted “real risk that politics would disrupt this deal, with the UK ‘losing’ an industry leader, particularly at a time when Brexit may elevate such sensitivities”.

The LSE also criticised the amount on the table, saying the offer significantly undervalues the group. It added that three-quarters of the £31.6bn bid was made up of HKEX shares whose value it called “inherently uncertain”.

“The ongoing situation in Hong Kong adds to this uncertainty,” the LSE wrote.

Massive and increasingly violent protests against a proposed extradition law have rocked Hong Kong since June. The legislation would allow criminal suspects to be sent to mainland China to stand trial in courts controlled by the Communist Party. In contrast, Hong Kong has an independent judiciary.

The unrest has continued despite the leader of Hong Kong formally scrapping the extradition bill, as the demonstrations have broadened into wider calls for democracy.

HKEX responded to the LSE’s letter, saying it is “disappointed” that the London group has declined to discuss its proposal. It added that it will continue to engage with LSE shareholders.

Register for free to continue reading

Registration is a free and easy way to support our truly independent journalism

By registering, you will also enjoy limited access to Premium articles, exclusive newsletters, commenting, and virtual events with our leading journalists

Please enter a valid email
Please enter a valid email
Must be at least 6 characters, include an upper and lower case character and a number
Must be at least 6 characters, include an upper and lower case character and a number
Must be at least 6 characters, include an upper and lower case character and a number
Please enter your first name
Special characters aren’t allowed
Please enter a name between 1 and 40 characters
Please enter your last name
Special characters aren’t allowed
Please enter a name between 1 and 40 characters
You must be over 18 years old to register
You must be over 18 years old to register
Opt-out-policy
You can opt-out at any time by signing in to your account to manage your preferences. Each email has a link to unsubscribe.

By clicking ‘Create my account’ you confirm that your data has been entered correctly and you have read and agree to our Terms of use, Cookie policy and Privacy notice.

This site is protected by reCAPTCHA and the Google Privacy policy and Terms of service apply.

Already have an account? sign in

By clicking ‘Register’ you confirm that your data has been entered correctly and you have read and agree to our Terms of use, Cookie policy and Privacy notice.

This site is protected by reCAPTCHA and the Google Privacy policy and Terms of service apply.

Register for free to continue reading

Registration is a free and easy way to support our truly independent journalism

By registering, you will also enjoy limited access to Premium articles, exclusive newsletters, commenting, and virtual events with our leading journalists

Already have an account? sign in

By clicking ‘Register’ you confirm that your data has been entered correctly and you have read and agree to our Terms of use, Cookie policy and Privacy notice.

This site is protected by reCAPTCHA and the Google Privacy policy and Terms of service apply.

Join our new commenting forum

Join thought-provoking conversations, follow other Independent readers and see their replies

Comments

Thank you for registering

Please refresh the page or navigate to another page on the site to be automatically logged inPlease refresh your browser to be logged in