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HKEX drops $39bn bid for London Stock Exchange

Strong opposition to offer thwarted plans to create global trading powerhouse

Under U.K. takeover rules, Hong Kong Exchanges & Clearing had until Oct. 9 to make a formal offer for the London Stock Exchange Group.   © Reuters

HONG KONG -- Hong Kong Exchanges & Clearing dropped its 32 billion-pound ($39.4 billion) unsolicited takeover bid for the London Stock Exchange Group and said it was disappointed that it was unable to convince the management of its U.K. rival of its "strategically compelling" vision.

HKEX continues to believe that a combination "would create a world-leading market infrastructure group," the market operator said in a statement on Tuesday.

"Despite engagement with a broad set of regulators and extensive shareholder engagement, the board of HKEX is disappointed that it has been unable to engage with the management of LSEG in realizing this vision and as a consequence has decided it is not in the best interests of HKEX shareholders to pursue this proposal," it said.

The move for now brings to an end HKEX's aim to create a global trading powerhouse across equities, commodities, derivatives and clearing in the financial centers on two continents. While the LSEG had quickly rejected the stock-and-cash offer launched on Sept. 11, HKEX had tried to woo shareholders and regulators over the merits of the deal.

Under U.K. takeover rules, HKEX had until Oct. 9 to make a formal offer, failing which it would not have been be able to make another offer for at least six months.

At the time of the offer, investors and analysts were concerned that the political opposition in Britain -- which has historically derailed tie-ups between national exchanges -- would likely be even more acute over concerns of an attempt by a China-linked company to take control of a globally important financial intermediary.

The Hong Kong government is the exchange's largest shareholder, and six members of the HKEX's 13-member board are appointed by the government.

Of equal worry was the security of data and information such institutions hold.

The move by HKEX allows LSEG to pursue its deal to acquire financial data provider Refinitiv for $27 billion, with shareholders scheduled to vote by the end of the year.

HKEX Chief Executive Charles Li wrote in a blog post following the decision to drop the bid: "Despite a huge amount of work and discussions with a broad set of regulators and extensive shareholder discussions, the level of engagement from LSEG led us to conclude that the continued pursuit of a combination of the two businesses would not be in the best interests of our own shareholders."

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