BY Richard Summerfield
Hong Kong Exchange and Clearing (HKEX) has pulled the plug on its unsolicited $39bn offer for the London Stock Exchange Group (LSEG) after it became clear that it had failed to convince LSEG’s investors and management of the benefits of a merger between the two.
HKEX, the world’s largest capital-raising venue in five of the past 10 years, had made an £83.61 per share offer for LSEG which would have required LSEG to abandon its agreed $27bn deal to buy the data and trading group Refinitiv.
HKEX’s offer was flatly rejected by LSEG, which said that HKEX’s offer fell “substantially short” of an appropriate valuation. In a published letter to HKEX, LSEG said there was “no merit in further engagement”. As a result, the Hong Kong bourse withdrew its offer.
Following its initial approach , under UK takeover rules HKEX had until Wednesday 9 October to make a binding offer for LSEG, but having withdrawn its offer is now unable to pursue a renewed deal for at least six months.
“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,” HKEX said in a regulatory statement. “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, and as a consequence has decided it is not in the best interests of HKEX shareholders to pursue this proposal.”
At the weekend, reports emerged which suggested that HKEX had been told by LSEG’s shareholders to increase its takeover offer to £90 a share, a 22 percent premium on LSE’s recent share price of £73.80.
In a statement, LSEG said it remained “committed to and continues to make good progress on its proposed acquisition of Refinitiv”. LSEG’s shareholders will vote on the Refinitiv deal in November, with the deal expected to close in the second half of 2020.