LSE rejects Hong Kong Exchange's surprise £29.6 billion takeover bid

London

LONDON Stock Exchange Group has formally rejected a takeover proposal from Asian rival Hong Kong Exchanges & Clearing, saying the bid has "fundamental flaws."

The board of the 300-year-old British bourse, which is working on its own deal to buy data provider Refinitiv in a US$27 billion deal, said HKEX's overtures on Wednesday had problems in its "strategy, deliverability, form of consideration and value".

"LSEG remains committed to and continues to make good progress on its proposed acquisition of Refinitiv," the firm said in a statement on Friday.

HKEX has said its takeover would only happen if the LSE ended its deal with Refinitiv, and that it could go hostile if the business resisted its plans to build an Anglo-Asian markets giant.

Shares in the LSE were up 1.6 per cent after the announcement in London trading. The shares initially rose as much as 16 per cent on Wednesday after HKEX said it wanted to combine the exchanges in a cash-and-stock deal that valued the London firm at £29.6 billion (S$50.2 billion).

However, the stock pared gains after analysts poured cold water on the deal and top investors raised doubts about its attractiveness compared to the Refinitiv acquisition.

The British government has the power to scrap the deal on public-interest grounds. On Wednesday it said LSE is a "critically important part of the UK financial system" and that it would be closely scrutinising details of the transaction.

LSE chief David Schwimmer was surprised earlier this week when HKEX CEO Charles Li paid the London bourse a visit to say he wanted to buy it.

Both firms have been involved in exchange merger deals in recent years, with LSE failing in its most recent attempt two years ago to combine with Deutsche Boerse. HKEX acquired London Metal Exchange in 2012 for £1.4 billion. BLOOMBERG