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UPDATE: Hong Kong Exchanges Defends London Stock Exchange Offer

Fri, 13th Sep 2019 15:46

(Alliance News) - Hong Kong Exchanges & Clearing Ltd on Friday responded to London Stock Exchange Group PLC's vociferous rejection of its GBP29.6 billion offer, saying the business combination could "create a global market infrastructure leader".

"The board of HKEX had hoped to enter into a constructive dialogue with the board of LSEG to discuss in detail the merits of its proposal and are disappointed that LSEG has declined to properly engage," said HKEX.

The firm also said it had been hoping to show that the acquisition would be much more beneficial to LSEG than the London company's plan to buy Refinitiv Holdings Ltd, which has a total enterprise value of USD27 billion.

Furthermore, HKEX said it had "undertaken thorough and detailed analysis ahead of making its approach to LSEG" and held constructive early talks with policy makers and regulators.

"HKEX continues to believe that its proposal is in the best interests of shareholders, customers and for global capital markets as a whole. HKEX believes that shareholders in LSEG should have the opportunity to analyse in detail both transactions and will continue to engage with them," the firm said.

Earlier on Friday, LSEG rejected the HKEX bid over what it described as "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.

Shares in LSEG were up 2.0% at 7,398.00 pence in London on Friday, while HKEX shares closed 1.4% higher at HKD240.80 in Hong Kong.

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