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Hong Kong Stock exchange's $39 billion acquisition offer bluntly rejected by London Stock Exchange


09/14/2019


Hong Kong Stock exchange's $39 billion acquisition offer bluntly rejected by London Stock Exchange
The unilateral offer by the Hong Kong Stock Exchange for purchasing the London Stock Exchange (LSE) for $39 billion was rejected by the LSE on Friday and has decided to continue with its planned acquisition of data and analytics group Refinitiv.
 
Following the rejection, the path open to the Hong Kong stock exchange (HKEX) now is to go in for a hostile bid and offer a better proposal directly to the shareholders of LSE. This deal is important of h Hong Kong stock exchange because a successful deal would make it equipped enough to rival the United States based global exchange giants ICE and CME.
 
There were fundamental concerns about crucial aspects of the proposal, said the LSE to the HKEX in a letter, and added that the proposal did not have any strategic merit. The letter also said that matters or a possible merger would be further complicated because of the close relationship between the HKEX and the Hong Kong government.
 
The London bourse also added that the “ongoing situation in Hong Kong” has created significant uncertainty or its shareholders and that the valuation of the LSE by the HKEX was “substantially short” than actual.
 
“Accordingly, the board unanimously rejects the conditional proposal and, given its fundamental flaws, sees no merit in further engagement,” the LSE said in a statement.
 
No immediate comment on the issue was available from the HKEX or the Hong Kong Exchanges and Clearing.
 
There was a rise in the shares of LSE after the news of the rejection was announced.
 
The strategic objectives of the LSE was not met by the offer from the HKEX< said a mostly blunt later form the London based exchange. In the letter, LSE said that it had decided to go ahead with its previously announced strategic move of completing the acquisition of Refinitiv and thereby expanding into the field of data following the proposed $27 billion deal. According to the LSE, agreeing to be taken over by the KHEX would be a “significant backward step”.  
 
The proposal from the KHEX, which was surprisingly made on Wednesday, had mandated that the LSE would have to cancel the Refinitiv acquisition for the merger.
 
Regulators or governments in Britain, the United States and Italy would have also most likely rejected the takeover bid by the Hong Kong exchange, the LSE also said. It added that the assumption of the KHEX that the acquisition would be swift and certain “is simply not credible.”
 
The LSE is also the owner of the Milan exchange and is present quite significantly in the United States through its FTSE Russell index subsidiary and LCH which is the derivatives clearing house of the LSE and which dominates the US dollar swap market.
 
According to analysts, this rejection is a clear indication that it is highly unlikely that an improved financial offer would impress and win over the LSE board by the chief of the KHEX Charles Li. That means that juts one route of acquisition remains – making a hostile bid directly to the shareholders of the LSE. But analysts said that Li will need to launch a major charm offensive with investors to convince them the LSE board is wrong if he wants to come back with a new offer.
 
(Source:www.reuters.com)


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