HK Exchange’s LSE bid hit by further setback as China balks

The London Stock Exchange is seeking to transform itself into a global force in data and trading platforms. (AFP pic)

LONDON: The Hong Kong bourse’s unsolicited takeover bid for the London Stock Exchange Group Plc was greeted with a scathing rejection and the exchange suffered a further humiliation when China praised the rebuff as well.

The official People’s Daily wrote Saturday that there are “persistent worries” about Hong Kong given the current unrest, and praised the LSE for citing its existing tie-up with the Shanghai Stock Exchange as its preferred way to access China in rejecting the offer.

With almost half the Hong Kong bourse’s board nominated by Hong Kong’s Beijing-backed chief executive, the slap down from the mouthpiece of the Communist party signals growing resistance to the bid.

“The LSE rejection alone would probably have derailed HKEX’s ambitions, but the People’s Daily article surely represents the end of any acquisition hopes,” said Brock Silvers, managing director at Kaiyuan Capital.

On Friday, LSE Chairman Don Robert released one of the harsher rejections of a corporate takeover offer in recent British memory, issuing a laundry list of geopolitical and business reasons why the LSE finds the US$36.8 billion bid wanting.

The offer had problems with “strategy, deliverability, form of consideration and value,” he said. The People’s Daily piled it on, signalling that the future of the Hong Kong exchange was linked to China, while also taking a swipe at the popular resistance to China’s increasing control over the city.

“Some people in Hong Kong still have a negative view toward integrating into the development of the nation, as they don’t see what opportunities it brings to Hong Kong,” according to the commentary.

“This doesn’t only show how short-sighted it is from an economic perspective, but also how narrow-minded from a political perspective.”

A spokesman for HKEX on Saturday said the bourse had no immediate comment on the People’s Daily’s article.

Charles Li, the chief executive of the Hong Kong Exchanges & Clearing Ltd, appears undeterred by the LSE’s rejection and is preparing to make his case for the takeover directly to LSE investors.

Beyond the political, regulatory and commercial hurdles HKEX faces, the Hong Kong bourse is also demanding LSE walk away from its own US$27 billion deal for data provider Refinitiv.

With the purchase of Refinitiv, the former Thomson Reuters financial and risk business, LSE is seeking to transform itself into a global force in data and trading platforms.

The deal is central to its strategy and has proved popular with investors, sending LSE shares surging even before HKEX came knocking.

The Hong Kong stock exchange is planning to undermine LSE’s case for buying Refinitiv and characterised the company as a low-growth utility weighed down with debt, the Times of London reported Sunday, without citing anyone.

The dealmaking for LSE involves some of the world’s highest-profile financiers. Stephen Schwarzman’s Blackstone Group is on one side, as lead investor in Refinitiv; on the other, Ken Moelis’s firm is advising HKEX.

The winning side will have to persuade the US$320 billion Qatar Investment Authority, the sovereign wealth fund and the LSE’s biggest shareholder, which has so far declined to comment on the HKEX proposal.