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HKEX makes surprise bid for LSEG
Posted on Wednesday, 11 September 2019 13:22
Hong Kong Exchanges and Clearing (HKEX) has made a surprise proposal to take the London Stock Exchange Group (LSEG) private via a GBP 31.60 billion deal the UK bourse has called “unsolicited” and “highly conditional”.

The cash-and-share bid equates to 8,361 pence apiece and an equity value of GBP 29.60 billion, when not including net debt and other adjustments of roughly GBP 2.00 billion, as at 30th June 2019.

However, it is contingent on LSEG dropping its USD 27.00 billion purchase of Refinitiv from a consortium comprising the likes of Thomson Reuters and Blackstone, among others.

While the London exchange did not dismiss the approach out of hand, it did state in its initial response to HKEX it “remains committed to and continues to make good progress on its proposed acquisition”.

The rival’s bid represents a premium of 22.9 per cent to yesterday’s close of 6,804 pence and is a multiple of 30.2x 2018 reported earnings before interest, tax, depreciation, amortisation and impairments.

As to be expected, the proposal has drawn a lot of comments from analysts, with Ben Kelly, a merger arbitrage analyst at Louis Capital Market, telling Markets Insider it is “opportunistic” given the weakness of the pound.

He added: "The idea of the UK stock exchange being taken over by a Hong Kong company which is 6% owned by Hong Kong seems like it’s likely to run up against quite a lot of opposition."

Meanwhile Neil Wilson, from Markets.com, had his own take on the matter, saying “the UK government may not wish to see such a vital symbol of UK financial services strength, and indeed a strategic asset, to be owned by foreigners”.

“Effectively it would hand it over to the Chinese through the Hong Kong back door,” he added.

Wilson noted: “I guess the question now is whether this approach forces others to join the party and spark a bidding war. Not everyone is so warm to the Refinitiv deal as the stock price adjustment suggests.”

© Zephus Ltd