The Hong Kong Stock Exchange showed no sign of discouragement to take over the London Stock Exchange despite the British bourse’s strongly worded rejection of the initial proposal, calling the deal «a significant backward step».
In a statement responding to LSE Group's (LSEG) rejection, HKEX said that it continued to believe in the «highly compelling strategic opportunity» from the proposed combination of the two bourses.
«The Board of HKEX had hoped to enter into a constructive dialogue with the Board of LSEG to discuss in detail the merits of its proposal and are disappointed that LSEG has declined to properly engage,» the statement said.
The statement reiterated how the benefits from the proposal «significantly outweighed» those offered by the proposed acquisition of financial data firm Refinitiv in a deal valued at an estimated $27 billion. HKEX stressed that it would forge ahead by continuing to engage shareholders for them to analyze opportunities from the deal.
HKEX Takeover Spells A « Significant Backward Step»
Following an unexpected proposal submission from the HKEX last week, LSEG quickly and emphatically rejected the bid saying that it saw no strategic merit for the transaction. It noted that the deal would, in fact, be a «significant backward step» due to the bourse’s high geographic concentration and heavy exposure to market transaction volumes.
The exchange’s characteristics aside, LSEG stressed that the value of HKEX shares was «inherently uncertain», citing concerns about the ongoing unrest in Hong Kong and the bourse’s long-term sustainability as a strategic gateway. The proposal would also require LSEG to abandon its plans to acquire Refinitiv, in which it repeatedly expressed confidence.
Unusual Board Structure
And even in the unlikely event that HKEX would be able to address all the aforementioned concerns, LSEG added that the proposal would still be subject to scrutiny by regulatory and government entities including those in the U.K., the U.S. and Italy. It highlighted that the HKEX’s «unusual Board structure and relationship with the Hong Kong government» would further complicate matters.
«Taking all of these factors into account, the Board unanimously rejects your proposal,» said LSEG chairman Don Robert in a statement to HKEX. «Given the fundamental flaws in your proposal, we see no merit in further engagement.