HKEX set to bid approximately £29.6bn for London Stock Exchange
Under the terms of the proposal, LSEG shareholders would receive 2,045 pence in cash and 2.495 newly issued HKEX shares per LSEG share.
London Stock Exchange Group plc (LSEG) has once again triggered a bid from a potential buyer. Hong Kong Exchanges and Clearing Limited (HKEX) today announces that it has made a proposal to the Board of LSEG to combine the two companies.
Under the terms of the Proposed Transaction submitted to the Board of LSEG, LSEG shareholders would receive 2,045 pence in cash and 2.495 newly issued HKEX shares per LSEG share.
The Proposed Transaction implies a value for each LSEG share of c. 8,361 pence. This would imply a value for the entire issued and to be issued ordinary share capital of LSEG of approximately £29.6 billion, implying an enterprise value of £31.6 billion (inclusive of net debt and other adjustments of approximately £2.0 billion as at 30 June 2019)1. The offer represents:
- – a premium of 22.9% to the closing share price of 6,804 pence per LSEG share on 10 September 2019;
- – a premium of 22.4% to the volume weighted average closing price of 6,833 pence per LSEG share since 29 July 2019, the first trading date after the first announcement of the Refinitiv transaction, to 10 September 2019;
- – a premium of 47.4% to the closing price of 5,672 pence per LSEG share on 26 July 2019, the last trading date before the first announcement of the Refinitiv transaction; and
- – a multiple of 30.2x times 2018 reported earnings before interest, tax, depreciation, amortisation and impairments.
According to HKEX, the proposed deal would form a world-leading market infrastructure group with a global footprint, diversified across asset class, ideally positioned to benefit from the evolving global macroeconomic landscape, connecting the established financial markets in the West with the emerging financial markets in the East, particularly in China.
The transaction would also elevate the UK’s role in capturing the significant growth opportunities presented by Mainland China’s continuing internationalisation and the emergence of RMB as a global reserve currency, securing London’s position as the global centre for both Eurodollar and offshore RMB.
The deal is also seen to offer innovation opportunities in equities, fixed income, currencies, commodities and derivatives products with domestic, regional and global relevance; allow for the application of best-in-class technologies in multiple markets and platforms; and help strengthen transparency, resiliency and risk capabilities in both London and Hong Kong.
HKEX believes that the Proposed Transaction would offer the prospect of significant synergies. In particular, the migration of HKEX’s trading and clearing platforms to LSEG’s technology, the revenue uplift in key businesses from cross-selling and innovation opportunities and a reduction in HKEX’s capital expenditures in connection with existing systems and future investment plans all present strong synergy opportunities. LSEG shareholders would benefit from the realisation of the synergies as future shareholders of the combined group.
HKEX notes that it has played a key role in underpinning the City of London’s position as the pre-eminent global centre for metals trading and more widely since acquiring The London Metal Exchange in 2012. It is expected that key LSEG management would continue to operate LSEG businesses and to participate in HKEX Group management following the Proposed Transaction.
The Proposed Transaction would be financed through a combination of existing HKEX cash resources and new credit facilities.
The Proposed Transaction would be subject to, amongst other things:
- · a resolution in respect of the approval of the Refinitiv transaction having been voted on and not approved by the LSEG shareholders; or the Refinitiv transaction being terminated, lapsing, being withdrawn or not proceeding for any other reason; in each case by 31 December 2019 or such later date as HKEX may determine;
- · due to its size, the approval by HKEX shareholders; and
- · other terms and conditions usually attaching to a scheme of arrangement or takeover offer, including conditions for regulatory and anti-trust approvals.