Hong Kong Stock Exchange Offers To Purchase London Stock Exchange For $37b

The Hong Kong Stock Exchange (HKEX ) has proposed to acquire the London Stock Exchange (LSE) with an offer of almost $36.6 billion.

The company said in a statement that the Hong Kong Stock Exchange has time till October 9 to make a final and firm offer for the purchase or to withdraw the proposal if it does not intend to go ahead with the deal. It said that the combined value of the two stock exchanges would be more than $70 billion.

The proposal would be considered by its board, the LSE said.

Recently, an agreement to offer $27 billion for acquiring the data company Refinitiv was made by the LSE and the exchange said that it was still sticking on to that commitment. “LSEG remains committed to and continues to make good progress on its proposed acquisition of Refinitiv,” LSEG said in a statement.

However the Hong Kong exchange’s offer would only be applicable if the LSE drops the Refinitiv deal.

The plans for the purchase of the LSE was announced by the HKEX on its website on Wednesday morning and said that the decision was made after some “early engagement” with the LSE

“Following early engagement with LSEG, we look forward to working in detail with the LSEG Board to demonstrate that this transaction is in the best interests of all stakeholders, investors, and both businesses,” HKEX CEO Charles Li said in a statement.

“We are early in the process so I can’t go into too much detail at this stage, but after many months of consideration we believe we have put forward a proposal that is ambitious, far-reaching, and could have a transformative effect on global financial markets.”

Its board would “consider this proposal and will make a further announcement in due course”, said the LSE.

HKEX said that its offer is valued at an estimated 8,361 pence per LSEG share and the value is 23 per cent higher than LSEG’s closing share price on Tuesday. The offer from HKEX comprises of 2,045 pence in cash and 2.495 newly issued HKEX shares for each LSEG share which would result in a total ultimate valuation o about £29.6 billion or $36.6 billion.

The merger “will create a world-leading global exchange that spans Asia, Europe and the United States,” Li said on HKEX’s website

“Together, they would provide an unprecedented market connectivity platform for global market participants, unleashing a new generation of opportunities on the world’s first truly global exchange,” he added.

Alternative trading venues and new regulation have created strong challenges for the business of stock exchanges.

There have been a number of merger attempts by the LSEG in the past, which ranged from attempts to merge with Intercontinental Exchange and German rival Deutsche Boerse, but to no avail.

Political upheavals and uncertainty currently prevails in both the cities that the LSE and the Hong Kong exchange are situated. Analysts expect that the historic public listing of a portion of the Saudi oil giant Saudi Aramco will not be done at the LSE which will be a huge blow to the exchange. On the other hand, the Chinese e-commerce giant Alibaba has postponed its plans of offering its second public offering of shares at the Hong Kong stock exchange because of the political turmoil in the city.

(Adapted from BusinessInsider.com)

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