After being “unable to engage” with management, the Hong Kong stock exchange has dropped its £32billion bid to take over the London Stock Exchange.
Hong Kong´s announcement regarding the situation came almost four weeks after the initial bid, which London turned down. The mainly stock – and part cash – proposal was considered to be a “significant backwards step” with “fundamental flaws” that saw “no merit in further engagement”.
On September 13th, the London Stock Exchange Group said the proposal fell “substantially short of an appropriate valuation” and the board rejected the bid unanimously.
The deal was conditional on the basis that London would drop the already advanced plans to buy financial data provider Refinitiv for £21.6bn.
This move would have seen the LSE transform into a business that would compete with New York-based Bloomberg for the title of the world’s biggest data and information company.
A concern expressed by LSE´s chairman, Don Robert, was the influence China´s mainland Communist Party has over the stock exchange´s operations. Also, the spotlight on Hong Kong currently focuses on pro-democracy protests, with demonstrations and the punishment of contributors being blamed for disrupting business and market values.
The Hong Kong Exchanges and Clearing (HKEX) said in a statement it still thought that joining forces with the LSE was “strategically compelling and would create a world-leading market infrastructure group”.
They argued that a deal would help protect London´s status and reputation of being a global hub from any Brexit backlash, and would also give the LSEG´s investors greater access to Asian markets.
HKEX also said: “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.”
The Asian stock exchange had until Wednesday 2nd October to follow up its primary offer and make a formal bid, which did not happen. Now, under UK rules, it is not allowed to make another approach for the LSE for six months.
After Hong Kong´s offer retraction, the London Stock Exchange´s shares fell by more than 6 per cent to £69.94: back to around the same level it was before the initial proposal. However, since then, it has settled to 4 per cent lower.