HONG KONG - Hong Kong Stock Exchange has cleared a $ 39 billion takeover bid for the London Stock Exchange, but has received a lukewarm response from investors worried about regulatory and financial hurdles.
The offer comes after a failed attempt to merge the London Stock Exchange and the German Stock Exchange against the backdrop of the European Commission's rejection in 2017 of this merger on two occasions.
For the offer to be accepted, the Hong Kong stock exchange must persuade British politicians and European regulators to drop their deep doubts about the merger of stock markets, Reuters reported.
It will also have to persuade investors on the London Stock Exchange, who prefer to retain their ownership following an agreement last month under which the exchange would acquire Refinitiv for $ 27 billion.
The offer requires the London Stock Exchange not to merge with UK-based Refinitiv Financial Data and Information.
Why this offer?
The Hong Kong Stock Exchange is betting on the offer that a global takeover could help it overcome uncertainty at home, against the backdrop of protests in the city, raising questions among large companies and investors about the attractiveness of the exchange.
The Hong Kong stock market is seeking to capitalize on the weakness of the pound sterling, which has been hit by Britain's inability to conclude an agreement to secede from the European Union. The devaluation of sterling makes British companies cheaper to foreign acquisitions.
The offer aims to create a group that can better compete with its American counterparts, including the InterContinental Stock Exchange and the CME Group.
|HONG KONG - The Hong Kong stock market is seeking to capitalize on the weakness of the pound, which has been hit by Britain's inability to conclude a deal to separate from the European Union (Reuters)|
Hong Kong said its merger offer would combine the strategic locations of London and Hong Kong as trading centers in euros, dollars and renminbi, as well as provide the UK with more entry points for the Chinese mainland, according to the German Press Agency.
The company said the deal would be financed through a combination of cash and a new credit facility, where it proposed to pay £ 20.45 per share in cash, in addition to issuing 2.5 new shares from the Hong Kong Stock Exchange, CNBC Arabia reported.
The London-based channel described the takeover bid as "not smooth" and analysts were quoted as saying the London Stock Exchange would reject the Hong Kong bourse offer.
The Hong Kong Stock Exchange is the fourth largest financial market in the world in terms of trading volume, while the London Stock Exchange manages the largest financial market in Europe.
The London Stock Exchange said it would consider the Hong Kong market offer. In a sign of lukewarm reception, it said it was committed to continuing to make good progress in its upcoming takeover of Refinitiv by US direct investment firm Blackstone and Thomson Reuters, the parent company of Reuters.
The deal to acquire Refinitiv will increase the LSE's presence and expand into the rest of the world. Founded in 2018, Revenet is estimated at $ 6 billion in revenue, according to CNBC Arabia.
One important challenge for the Hong Kong Stock Exchange is to get support from the British government, which has already shown some caution about the takeover of its stock by a foreign acquirer with close ties to China, which could pave the way for the London Stock Exchange to pass data to the Chinese government.
The German stock exchange has failed to take over the London Stock Exchange three times in the past few years, facing opposition from politicians and regulators.