(Alliance News) - London Stock Exchange Group PLC on Friday said it has rejected the GBP29.6 billion offer made by Hong Kong Exchanges and Clearing Ltd over what it sees a "fundamental flaws".
"The board has fundamental concerns about the key aspects of the conditional proposal: strategy, deliverability, form of consideration and value. Accordingly, the board unanimously rejects the conditional proposal and, given its fundamental flaws, sees no merit in further engagement," LSEG said.
The company also published Chair Don Robert's letter to HKEX, in which he said the firm was "very surprised and disappointed" by the decision to publish the offer proposal only two days after it was received by LSEG.
Reasons provided for the rejection included that it did not meet LSEG's objectives and would "represent a significant backward step" strategically, given HKEX's "high geographic concentration and heavy exposure to market transaction volumes".
Robert also noted that the deal "would be subject to full scrutiny from a number of financial regulators" and said the approval process would likely be "exhaustive".
The chair further stated that three-quarters of the consideration for LSEG would be in shares, which would be "a fundamentally different and much less attractive investment proposition" for shareholders.
Finally, Robert said the value of the offer "falls substantially short of an appropriate valuation for a takeover of LSEG" particularly when factoring in the ongoing acquisition of Refinitiv Holdings Ltd for a total enterprise value of USD27 billion.
This announcement matches the Financial Times story published Thursday, which cited two people "close to the board" who said LSEG was likely to rebuff the offer. Later on Thursday, the FT said HKEX is planning to up its bid to increase the cash element of its offer but was waiting on a LSEG bid response.
Shares in LSEG were up 1.5% at 7,358.00 pence in London on Friday, while HKEX shares closed 1.4% higher at HKD240.80 in Hong Kong.
