Hong Kong Exchanges and Clearing Ltd. announced Wednesday a proposal to acquire the London Stock Exchange Group for £29.6 billion ($36.6 billion) in a deal it contended would create a global Goliath combining the strengths and opportunities of developed and emerging markets.
HKEX and LSEG combined would have the “unique potential to enhance and capture global capital and data flows,” according to a Hong Kong Exchange news release outlining the planned offer.
The deal would be contingent on LSEG rescinding its $27 billion bid, announced Aug. 1, to acquire Refinitiv Holdings Ltd.’s market data, analytics and execution business.
LSEG said in a statement Wednesday it will consider HKEX’s announcement of an “unsolicited, preliminary and highly conditional proposal to acquire the entire share capital of LSEG,” but said it remains committed to its proposed acquisition of Refinitiv Holdings Ltd.
The HKEX announcement predicted significant synergies from the complementary strengths and stages of development of East and West, against the backdrop of China’s emergence as a global economic powerhouse.
“As China’s economic growth has accelerated, so too has Hong Kong’s role as a vital connector between East and West — and today’s announcement is the next major step on the path of connecting China and Asia with the world,” said Charles Li, chief executive of HKEX, in a blog posting Wednesday.
“The combined group could provide the most comprehensive and international product and service offering to Asian investors, whilst also opening up Asia’s emerging economies, such as China, to provide unlimited long-term capital flows to fund the growth of developed capital markets in the West,” he said.
HKEX’s offer of 2,045 pence in cash and 2.495 newly issued HKEX shares for each LSEG share would represent a 22.9% premium to LSEG’s closing share price of 6,804 pence on Sept. 10, as well as a multiple of 30.2 times LSEG’s 2018 reported earnings before interest, tax, depreciation, amortization and impairments.
LSEG's stock surged more than 16% from the previous day's close at Wednesday’s open of London trading but recently traded at 7,164 pence, up a bit more than 5%.