Failed bid for London Stock Exchange leads to HK$130m in costs for HKEX

Maria Nikolova

The amount comprises fees payable to professional advisors of HK$128 million and other costs of HK$2 million.

The failed attempt by Hong Kong Exchanges and Clearing Limited (HKEX) to acquire London Stock Exchange Group plc (LSEG) has resulted in HK$130 million in costs for HKEX, as indicated by the financial results posted by HKEX earlier today.

The amount of HK$130 million represented costs incurred due to the proposed combination with LSEG. The sum comprises fees payable to professional advisors of HK$128 million and other costs of HK$2 million.

On September 11, 2019, HKEX announced its intention to make a possible offer for LSEG. HKEX believed that a combination of LSEG and HKEX was strategically compelling and would create a world-leading market infrastructure group. A couple of days later, however, LSEG rejected the offer.

The Board of LSEG said back then it had fundamental concerns about the key aspects of the Conditional Proposal: strategy, deliverability, form of consideration and value. LSEG noted that three-quarters of the proposed consideration is in HKEX shares, representing a fundamentally different and much less attractive investment proposition to LSEG shareholders, as LSEG sees the value of HKEX share consideration as inherently uncertain.

Further, according to the Board, the value fell substantially short of an appropriate valuation for a takeover of LSEG, especially when compared to the significant value LSEG expects to create through LSEG’s planned acquisition of Refinitiv.

In addition, LSEG said it did not believe HKEX provides it with the best long-term positioning in Asia or the best listing / trading platform for China. LSEG insisted it values its mutually beneficial partnership with the Shanghai Stock Exchange which is its preferred and direct channel to access the many opportunities with China.

HKEX announced on October 8, 2019 that it would not proceed to make a firm offer for LSEG, as it had been unable to engage with the management of LSEG in realising its vision and continuation would not be in the best interests of shareholders.

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