LONDON: Hong Kong Exchanges and Clearing Ltd. made a surprise offer for London Stock Exchange Group Plc, valuing one of Europe’s largest exchanges at 29.6 billion pounds ($36.6 billion).
“Bringing HKEX and LSEG together will redefine global capital markets for decades to come, ” HKEX Chief Executive Charles Li said in a statement Wednesday.
“Both businesses have great brands, financial strength and proven growth track records.”
The bid comes after LSE agreed to snap up Refinitiv in a $27 billion blockbuster deal just weeks ago, betting on a future dominated by data as the three-century-old exchange seeks to extend its global reach. - Bloomberg
Below is the statement issued by HKEX
The Proposed Transaction would:
- Create a world-leading market infrastructure group with a global footprint, diversified across asset class, ideally positioned to benefit from the evolving global macroeconomic landscape, connecting the established financial markets in the West with the emerging financial markets in the East, particularly in China;
- Elevate the UK’s role in capturing the significant growth opportunities presented by Mainland China’s continuing internationalisation and the emergence of RMB as a global reserve currency, securing London’s position as the global centre for both Eurodollar and offshore RMB;
- Reinforce Hong Kong’s position as the key connection between Mainland China, Asia and the rest of the world, providing a trusted and clear path for the continued opening up of Mainland China’s capital markets and for the investment of Asia’s growing wealth;
- Enable the creation of unique and valuable data sets for global investors, through the combination of LSEG’s global data and analytics capabilities and distribution channels, and HKEX’s access to China, the world’s most digitalised growth economy;
- Enhance global capital formation by making it easier for companies to access equity capital across the world, through the IPO and secondary fundraising markets in London, Hong Kong, Milan, and Mainland China via the Connect programmes; and
- Offer innovation opportunities in equities, fixed income, currencies, commodities and derivatives products with domestic, regional and global relevance; allow for the application of best-in-class technologies in multiple markets and platforms; and help strengthen transparency, resiliency and risk capabilities in both London and Hong Kong.
HKEX believes that the Proposed Transaction would offer the prospect of significant synergies.
In particular, the migration of HKEX’s trading and clearing platforms to LSEG’s technology, the revenue uplift in key businesses from cross-selling and innovation opportunities and a reduction in HKEX’s capital expenditures in connection with existing systems and future investment plans all present strong synergy opportunities.
LSEG shareholders would benefit from the realisation of the synergies as future shareholders of the combined group.
HKEX has played a key role in underpinning the City of London’s position as the pre-eminent global centre for metals trading and more widely since acquiring The London Metal Exchange in 2012.
It is expected that key LSEG management would continue to operate LSEG businesses and to participate in HKEX Group management following the Proposed Transaction; and, working with the relevant authorities, it is expected that key LSEG businesses would continue to be regulated by their existing primary regulators.
As regards the future governance structure of the combined entity, HKEX has begun conversations with certain regulators in the UK and Hong Kong and looks forward to discussing the transaction in detail with LSEG and all relevant regulatory bodies.
HKEX will have regard to UK corporate governance best practices, appropriate for a leading global market infrastructure group. In addition, HKEX is fully committed to supporting and building the long-term roles of both London and Hong Kong as global financial centres.
Under the terms of the Proposed Transaction submitted to the Board of LSEG, LSEG shareholders would receive per LSEG share:
2,045 pence in cash and 2.495 newly issued HKEX shares
The Proposed Transaction implies a value for each LSEG share of c. 8,361 pence (based on the closing price of HK$245.20 per HKEX share on 10 September 2019 and a £:HK$ exchange rate of £1=HK$9.6865).
This would imply a value for the entire issued and to be issued ordinary share capital of LSEG (on the assumption that the listed share capital comprises 354,471,415 shares, post employee option exercise) of approximately £29.6 billion, implying an enterprise value of
£31.6 billion (inclusive of net debt and other adjustments of approximately £2.0 billion as at 30 June 2019)1. This represents:
a premium of 22.9% to the closing share price of 6,804 pence per LSEG share on 10 September 2019;
a premium of 22.4% to the volume weighted average closing price of 6,833 pence per LSEG share since 29 July 2019, the first trading date after the first announcement of the Refinitiv transaction, to 10 September 2019;
a premium of 47.4% to the closing price of 5,672 pence per LSEG share on 26 July 2019, the last trading date before the first announcement of the Refinitiv transaction; and
a multiple of 30.2x times 2018 reported earnings before interest, tax, depreciation, amortisation and impairments2.
HKEX intends to apply for a secondary listing of HKEX shares on the London Stock Exchange with effect from completion of the Proposed Transaction, reflecting HKEX’s commitment to the UK.
Click here to see statements issued by HKEX: Statement regarding possible offer for London Stock Exchange Group plc