The Hong Kong Stock Exchange has abandoned its £32 billion bid for the London Stock Exchange after it was deemed unable to engage with management on this deal. The announcement by HK Exchanges and Clearing came four weeks after the London Stock Exchange denied the cash and share bid and called it a significant backward step that has fundamental flaws. They have said that no merits exist in holding talks with the Hong Kong Stock Exchange.
Shares in the LSE dropped by 6% to £69.94, to the same level as they were before the approach by the Hong Kong Stock Exchange. The takeover would have wreaked havoc in London Stock Exchange’s $27 billion deal to buy financial data collector Refinery. This move will pitch Refinery as the rival to financial news and data business channel Bloomberg.
HKEX believed that since their largest shareholder is the Hong Kong Government, their buying over the LSE would make a strategically compelling move and lead them to become world-leaders in the market infrastructure group.
It also added that despite engagement with a large set of regulators and shareholder engagement, the board will not be able to engage with its London counterpart and discouraged its shareholders from investing in the proposal. The London Stock Exchange, in turn, is making progress with the Refinery acquiring and hopes the deal will be completed by this time in 2020.
The Chairman of LSE, Don Robert, stated concerns about HKEX and its ties to the government, which made the deal even more difficult to agree upon. One half of the Hong Kong Exchange is appointed to their positions by the Hong Kong Government which is currently facing 4 month-long protests that turned violent weeks ago.
The deal, as argued by HKEX, could bring the two biggest financial centers in Asia and Europe, and will give the London investors access to Asian markets while emerging as a global reserve currency. The HKEX already has purchased the London Metal Exchange in 2012 for £1.4bn and has failed to bridge the distance between the continents.