HKEx disappointed at failed LSE takeover but door remains open

Singapore

HONG Kong Exchange and Clearing (HKEx) has expressed disappointment that its takeover bid for the 300-year old London Stock Exchange (LSE) did not pan out, but chairwoman Laura Cha is not ruling out revisiting the deal in the future or tying up with other exchanges.

"Of course we are disappointed that the deal did not go through but to move forward will be going into hostile territory which is not something we have intended," said Ms Cha on Wednesday. She was in Singapore for the 59th World Federation of Exchange general assembly and annual meeting.

Asked if HKEx will revisit the deal in future or tie up with another stock exchange, Ms Cha said: "It is hard to say", but "I wouldn't rule that out."

"The door is not closed. It is a second pillar of our three-pillar strategy," she added.

"When we came up with our strategy this year, we had a three-pronged strategy for HKEx the next three years: China connected, internationally connected and technology empowered," she said.

"Our attempt to acquire the LSE is one facet of our second plan, which is globally connected. Globally connected doesn't just mean a physical acquisition, but also global products, global reach, allowing global investors to be our participants. These are all part of second pillar of our three-pronged strategy," said Ms Cha, the first woman to chair HKEx in the bourse's 128 years of history.

On whether the bid was ill-timed, she acknowledged: "There is never a perfect timing", adding: "Currently, the timing is not most optimal. But last September (2018), with what we knew then, we thought the timing was not so good because Brexit was so uncertain. At that time in September last year, there was talk that Brexit would become clear before March 31. Of course, we now know it came and went." She further added: "In September this year, we thought it was better timing."

HKEx considered buying LSE last year but there was concern about Brexit, which continues to spook markets even today. The date of Britain's departure from the European Union is still unknown despite British Prime Minister Boris Johnson's promise to quit, "do or die", by Oct 31, 2019.

HKEx eventually made a surprise "now or never" takeover attempt to buy LSE for US$39 billion last month, but LSE Group chief executive officer David Schwimmer rejected the deal.

The takeover was a long shot to begin with, given the regulatory and political hurdles that had to be crossed. Some observers said the proposal did not get support in China, where the official People's Daily newspaper pointed to "persistent worries" about Hong Kong given the current unrest, and instead promoted LSE's existing tie-up with the Shanghai Stock Exchange.

Despite the rejection, HKEx "walked away with our heads high", Ms Cha said, adding: "LSE did not engage."

She said that recent reforms implemented by HKEx have been "very successful". "We have seen a few companies with weighted voting rights (WVR) listed," she elaborated, adding that the new biotech sector which did not require companies to have revenue before listing, was a breakthrough.

"There is a large pipeline . . . Some have done well, others have not. But this is our attempt to keep ourselves relevant to market trend to develop in the new economy and one way not to marginalise," she said.

The pipeline for initial public offerings is also looking good though not as robust as last year as a combination of global factors and tensions in Hong Kong weigh heavily on investors.

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