Hong Kong stock exchange proposes to takeover with LSE

Hong Kong stock exchange proposes merger with London Stock Exchange (LSE).

Hong Kong Exchanges and Clearing has made a surprise USD 39 billion takeover bid for the London Stock Exchange, an offer contingent on the LSE ditching its acquisition of data company Refinitiv. The combination would help both exchanges compete better with rivals like ICE and CME from the United States.

The LSE has long sought to bolster its presence in Asia and recently launched a link scheme with HKEX competitor Shanghai. "The board of HKEX believes a proposed combination with LSEG represents a highly compelling strategic opportunity to create a global market infrastructure leader," the Hong Kong exchange said in a statement on Wednesday. In response to HKEX's announcement, the LSE said it was committed to and continued to make good progress on its proposed acquisition of Refinitiv.

The takeover bid by the Hong Kong company comes as Britain is set to leave the European Union, a step some politicians fear could weaken its large financial sector.

HKEX, which already has a base in London as owner of the London Metal Exchange, said it had played a key role in underpinning the City of London's position as a pre-eminent global centre for metals trading. "HKEX is fully committed to supporting and building the long term roles of both London and Hong Kong as global financial centres," it added.

The proposed 31.6 billion pounds cash-and-share transaction would only go ahead if the LSE's proposed takeover of Refinitiv does not proceed, HKEX said. The LSE announced in August that it has agreed to buy Refinitiv in a USD 27 billion deal aimed at transforming the exchange into a market data and analytics giant. Refinitiv declined to comment. Its majority shareholder Blackstone had no immediate comment, while minority shareholder Thomson Reuters declined to comment. Reuters news agency is a unit of Thomson Reuters.

The bid for the LSE comes at a time when HKEX is beset by political turmoil. Pro-democracy protesters lit fires and vandalized a metro station near the exchange on Saturday as increasingly violent clashes with police move into their fourth month. "This is not helpful. As a financial centre, trust and confidence are important," HKEX CEO Charles Li said of the protests last month, when HKEX reported a 21% fall in trading fees in the first half of the year.

HKEX has been the world's largest listings venue in five of the past 10 years, splitting the crown over that decade with the New York Stock Exchange, according to Refinitiv data. But this year it has fallen behind, raising USD 10.8 billion to the NYSE's USD 20.2 billion, with activity suffering as the political turmoil deepened. Last month, Alibaba delayed plans for a USD 15 billion offering because of the unrest.