HKEX Holds Out Prospect of Going Hostile in $37 Billion LSE Bid

HKEX Said Planning to Pitch Bid Merits Directly to LSE Holders

(Bloomberg) -- Charles Li isn’t taking “no” for an answer.

Rejected by London Stock Exchange Group Plc directors, the chief executive officer of Hong Kong’s bourse is ready to make his case for the 29.6 billion-pound ($37 billion) takeover directly to investors.

LSE shareholders “should have the opportunity to analyze” the proposal in detail, according to a statement Friday by Hong Kong Exchanges & Clearing Ltd. Beyond the political, regulatory and commercial hurdles, HKEX is also demanding LSE walk away from its own $27 billion deal for data provider Refinitiv.

“The Hong Kong exchange is seeing London Stock Exchange holders over the next few weeks to walk through the benefits of their offer,” said Guy de Blonay, a fund manager at Jupiter Asset Management Ltd. in London. “That means going hostile is not out of the question.”

The dealmaking involves some of the world’s highest-profile financiers. Stephen Schwarzman’s Blackstone Group is on one side, as lead investor in Refinitiv; on the other, Ken Moelis’s firm is advising HKEX. The winner side will have to persuade the $320 billion Qatar Investment Authority, the sovereign wealth fund and the LSE’s biggest shareholder, which has so far declined to comment on the HKEX proposal.

Early Friday, LSE rejected HKEX’s offer, citing problems in “strategy, deliverability, form of consideration and value.”

“Your assertion that implementation of a transaction would be ‘swift and certain’ is simply not credible,” LSE said in its statement. “We see no merit in further engagement.”

Negotiations Sought

HKEX responded by saying it’s still seeking negotiations with LSE’s board and hasn’t decided yet to take the hostile route of directly making a tender offer to LSE shareholders, a person with knowledge of the matter said.

In the meantime, HKEX has quietly begun its campaign on the ground, citing analysts’ criticism of the Refinitiv deal, according to people familiar with the matter. An Aug. 13 Commerzbank AG analyst report pointed to sluggish growth at Refinitiv and said a substantial part of its revenue base is in “structural decline.”

For its part, the LSE has pinned its future on a world dominated by data with its bid for Refinitiv, the business that used to be Thomson Reuters Corp.’s financial and risk unit. Bloomberg LP, the parent of Bloomberg News, competes with Refinitiv to provide financial news, data and information.

Speaking to reporters on Wednesday, Li touted the benefits of enabling two-way capital flows between East and West, “bringing together significant financial centers of Asia and Europe” and facilitating an 18-hour trading day.

The business arguments may prove moot amid rising global political tensions. Protests in Hong Kong and U.S. President Donald Trump’s trade war with China could make the sale of the LSE to China-backed interests too fraught.


The LSE choice is between “letting go of a deal that has much greater certainty versus waiting for what could in fact be more than a year of political deliberations,” said Niki Beattie, founder of consultancy Market Structure Partners in London. Such roadblocks can “suck the life out of the organization.”

In London, U.K. Business Secretary Andrea Leadsom said on Wednesday the U.K. would “look very carefully” at anything with “security implications.” The British political class may also be unwilling to court controversy given the drama over delivering Brexit.

Underscoring investor doubts over HKEX’s bid, LSE shares closed Friday at 7,514 pence, 10% lower than HKEX’s 8,361 pence per share offer.

“The LSE’s board has mentioned a wide list of reasons for why it sees no merit for engagement,” said Iacopo Dalu, research analyst at Janus Henderson Group Plc, an LSE shareholder. It’s likely HKEX will “have to go hostile, but if you do, the complexity of the deal increases and one of the reasons why the market isn’t convinced about this offer is precisely that — because it’d be hard to get approved.”

--With assistance from Kiuyan Wong, Viren Vaghela and Aaron Kirchfeld.

To contact the reporters on this story: Jan-Henrik Förster in London at;Sonali Basak in New York at;Suzy Waite in London at

To contact the editors responsible for this story: Ben Scent at, James Hertling, Marion Dakers

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