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Caixin
Sep 11, 2019 08:27 PM
FINANCE

Update: HKEx Offers $36.5 Billion to Buy London Stock Exchange

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The Hong Kong Stock Exchange building in Hong Kong on Feb. 11. Photo: VCG
The Hong Kong Stock Exchange building in Hong Kong on Feb. 11. Photo: VCG

The operator of Hong Kong’s stock exchange made a surprise bid Wednesday to take over the London Stock Exchange for 29.6 billion pounds ($36.5 billion) under a plan to “combine” the two premier markets.

Hong Kong Exchanges and Clearing Limited (HKEx) offered to pay 83.61 pounds for each LSE share in cash and stock, representing a premium of 22.9% on the London bourse’s share price at the close of trading Tuesday, according to by HKEx.

The proposed deal marks HKEx’s second major overseas expansion attempt since it acquired the London Metal Exchange, the world’s largest market in options and futures contracts on base and other metals, in 2012 for 1.4 billion pounds.

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

“Together, we will connect East and West, be more diversified, and we will be able to offer customers greater innovation, risk management and trading opportunities,” HKEx Chief Executive Officer Charles Li said in a press release.

According to the HKEx offer, it would pay 20.45 pounds in cash and issue 2.495 new HKEx shares for each LSE share. The Hong Kong bourse would finance the deal through cash and new credit facilities.

The LSE said it will consider the HKEx offer, which it called "unsolicited, preliminary and highly conditional."

The transaction will be subject to approval by shareholders of the two companies, as well as regulatory and anti-trust reviews, the HKEx said.

A deal with HKEx could thwart the LSE’s ambition to expand into the data business by acquiring financial information provider Refinitiv Holdings Ltd. The LSE in late July announced plans to buy Refinitiv, previously part of Reuters, from private equity group Blackstone for $27 billion.

HKEx said the deal could move ahead only if the LSE drops its plan to buy Refinitiv.

But the LSE said in a statement that its board “remains committed to” the acquisition of Refinitiv and will seek shareholders’ approval in November.

On a conference call Wednesday night, Li said the combination would benefit both the Hong Kong and London markets and he saw no reason that the deal should be blocked.

The two bourses have different business strengths, and there will be no competition concerns after the combination, said HKEx Chairwoman Laura Cha Shih May-lung.

The two trading hubs are under social and political pressures related to the uncertainties of Brexit and the months-long civil unrest in Hong Kong.

James Fok, HKEx’s strategy head, said the proposed deal has nothing to do with the city’s recent situation but reflects a decision following lengthy deliberation.

“You don’t choose timing, you choose what is the right thing to do,” Li said during the conference call.

This story was updated with more details of the proposed deal and comments from HKEx executives.

Contact reporter Liu Jiefei (jiefeiliu@caixin.com)

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