Exchange consolidation is not very common in today’s international markets, it seems. However, this didn’t stop the Hong Kong Exchange (HKEX) to make an unsolicited $36.6 billion offer for the London Stock Exchange (LSE).
The takeover bid stunned the financial world, as many experts called the unsolicited bid “aggressive” and “unexpected”. HKEX commented that the proposal to buy LSE amounted to GBP 31.6 billion in a cash and share deal that included debt. If the takeover bid is successful, the joint entity will be the third largest stock exchange in the world, third only to the New York and Nasdaq one. This is in terms of the value of the listed companies on the respective markets as of today.
Undoubtedly, this mega deal will redefine how global capital markets operate, a fact that was given my the CEO of HKEX, Mr. Charles Li. He also added that if the deal came through, it would solidify Hong Kong’s major position as a connection between China, Asia and the rest of the globe.
The offer, however, comes at tumultuous times for both countries. London is one of the most important financial centres in the world. Brexit, however, is casting a huge shadow over London’s “mega finance” status. On the other hand, as CNN reported, Hong Kong has been clouded with protests on pro-democracy issues.
Although the takeover bid was just announced, there have been lots of comments regarding the offer. A British government spokesperson said:
The London Stock Exchange is a critically important part of the UK financial system, so as you would expect, the government and the regulators will be looking at the details closely.
One of the biggest controversies being discussed is that the bid is conditional on that LSE terminates its proposed acquisition of Refinitiv, a $27 billion deal. Refinitiv is a huge financial data service provider and if the deal goes through, LSE will be literally transformed into a financial data powerhouse.
LSE came with a statement reinstating their commitment to Refinitiv. They also called the HKEX bid “unsolicited and highly conditional”. HKEX, on the other hand, said that the bid was not hostile in any case.
The latest news is that LSE is going to reject the offer, as it involves a ton of political risk and complicated deal structure. The information comes from two people briefed on the deal and on the LSE board.
While HKEX hopes to bridge the gap between EU and Asian markets and get a significant exposure to international markets, the deal, as of this point, is not likely to go through.