The Honk Kong Exchanges and Clearing Ltd. made a highly conditional offer to London Stock Exchange for combining with each other earlier on Wednesday.
The Financial Times reported that the Hong Kong exchange made a bid of about £32bn to acquire the London Stock Exchange.The David Schwimmer,the person who runs LSE said the proposal was “preliminary and highly conditional” adding that it would consider it.This is also due to the political unrest in and around Hong Kong and the political instability in the UK due to the Brexit deal.
This offer helped LSE shares to rise up by 16% on Wednesday but it ended the day with a close of £72.14, a net increase of 6%
The LSE is already interested in acquiring Refinitiv for $27bn.The shareholder’s approval for the same is still awaited.It is likely that it will reject the offer of HKEX.The Refinitiv acquisition would enable it to compete against companies like Intercontinental Exchange and CME Group.This shows that exchange operators are now moving away from their core business to trading and monetisation of data.
HKEX said in its offer document that it wishes to merge “the largest and most significant financial centres in Asia and Europe”.This would value LSE shares at £83.61.
It is offering newly issued 2.495 shares against each LSE share and also £20.45 in cash.
A UK government spokesperson said,The LSE “is a critically important part of the UK financial system . . . as you would expect, the government and regulators will be looking at the details closely.”
This deal could also enable the exchange in London to use the market data in China, monetise it and connect to their fast growing domestic market.
The deal would give the HKEX control of the London Clearing House in which the London Stock Exchange holds majority of the shares.
HKEX was “trying to diversify away from their Chinese exposure, which is why they are bidding now and not nine months ago,”said one of the top LSE shareholders.
“Shareholders won’t be rushed to make a decision as we like the Refinitiv deal,” the investor added. “If this is an opening gambit by HKEX and they go 10 per cent higher, then it will be a case of what might happen in the short term to the LSE share price versus a five-year view on where the share price can go on a successful Refinitiv integration.”
If the offer is accepted it would be the largest bid in the history of HKEX.It had bought the London Metal Exchange for £1.4bn, back in 2012.
