However, the proposal requires the London bourse to terminate its acquisition of Refinitiv.
Hong Kong Exchanges and Clearing Limited (HKEX) has unveiled an unsolicited proposal to combine with the London Stock Exchange Group (LSEG) in a cash and share deal worth $285.86b (£29.6b), or $305.18b (£31.6b) inclusive of debt.
In the rationale for the proposal, HKEX said that it plans to create “a world-leading market infrastructure group” through the merger.
The transaction, if it proceeds, will see HKEX gain control of not just the entire share capital of British-based stock exchange but also of Borsa Italiana, Italy’s only stock exchange which became a subsidiary of LSEG in 2007.
Under the terms of the proposed transaction submitted to the board of the London-based group, LSEG shareholders would receive $0.2 (£0.02045) in cash and 2.495 newly-issued HKEX shares per LSEG share. Furthermore, HKEX said that intends to apply for a secondary listing of HKEX shares on the London Stock Exchange upon completion of the proposed transaction.
However, the proposal is conditional on LSEG terminating its proposed $37.16b (US$27b) acquisition of Refinitiv Holdings that was first announced last August.
In a statement, the board of LSEG called HKEX’s plan an “unsolicited, preliminary, and highly conditional proposal,” and reiterated its commitment to the Refinitiv deal. However, the group did not close doors on the proposal, saying that they will consider it.
HKEX is also aims to reinforce Hong Kong’s position as the key connection between mainland China, Asia and the rest of the world as well as provide a path to open up China’s capital markets through this merger, the announcement’s rationale stated.
According to Charles Li, chief executive of HKEX, the proposal is part of the company’s “Strategic Plan 2019-2021”, which carries the three major themes of “China Anchored, Globally Connected, Technology Empowered.”
“To achieve our goal of being a truly globally connected exchange, we considered our options and felt a merger with LSEG made the most sense,” he added.
HKEX said that the proposal would be financed through a combination of existing company cash resources and new credit facilities.
As per the announcement, HKEX will announce whether it intends to make an offer by 9 October, 5PM.
Photo by Kaihsu Tai (Wikimedia Commons)