Tuesday 8 October 2019 4:39 pm

Hong Kong abandons £32bn bid for London Stock Exchange

Shares in the London Stock Exchange (LSE) dropped as much as six per cent today after Hong Kong Exchanges and Clearing (HKEX) confirmed it has abandoned its audacious £32bn takeover bid.

“HKEX confirms that it does not intend to make an offer for LSE,” it told the market on open.

Read more: Shareholders tell HKEX to up its offer for the London Stock Exchange

“The board of HKEX continues to believe that a combination of LSE and HKEX is strategically compelling and would create a world-leading market infrastructure group,” it said.

London Stock Exchange’s share price fell as low as 6,950p, before recovering slightly to close down 5.8 per cent at 7,020p. HKEX’s offer had pushed LSE’s share price up to 7,514p.

“The board of HKEX is disappointed that it has been unable to engage with the management of LSE in realising this vision,” HKEX said.

“As a consequence has decided it is not in the best interests of HKEX shareholders to pursue this proposal.”

CMC Markets chief market analyst Michael Hewson said LSE’s share price drop was just evidence of traders offloading “speculative punts”.

“In reality the HKEX deal was never a realistic possibility when set against a hostile management at the London Stock Exchange and a Chinese regulator who were lukewarm at best,” he added.

“Even if HKEX had decided to up their offer, the deal was of questionable merit, given the problems in Hong Kong right now, along with the exchange’s management structure, which raised concerns about Chinese possible government influence.”

London Stock Exchange had firmly rebuffed the bid in favour of pursuing its $27bn (£22bn) acquisition of financial data powerhouse Refinitiv, saying it contained “fundamental flaws”.

LSEG cited issues ranging from the “huge risk” of regulators blocking the move, being forced to walk away from its Refinitiv merger and a low-ball offer price.

LSEG chief executive David Schwimmer also criticised the nature of HKEX’s approach, which surprised many onlookers considering the turmoil Hong Kong is currently experiencing.

HKEX is attempting to cement its position as the west’s gateway to the Chinese market in the face of stiff competition from Shanghai and Shenzhen.

Read more: Analysis: Why LSE rejected HKEX’s £32bn takeover offer

“This deal was a non-starter for a range of reasons, any one of which would have been enough to block a merger,” Markets.com chief market analyst Neil Wilson said.

“Still we’re slightly surprised HKEX didn’t try again – the fact they didn’t suggests their charms, dubious as they are, were completely lost on the big shareholders. Shares slipped 6% to £70 on the open, but what remains unclear is whether one of the large US exchanges comes in.”