HK exchange LSE bid hit by China rebuff

Bloomberg

The Hong Kong bourse’s unsolicited takeover bid for the London Stock Exchange (LSE) Group Plc was greeted with a scathing rejection and the exchange suffered a further humiliation when China praised the rebuff as well.
The official People’s Daily wrote that there are “persistent worries” about Hong Kong given the current unrest, and praised the LSE for citing its existing tie-up with the Shanghai Stock Exchange as its preferred way to access China in rejecting the offer. With almost half the Hong Kong bourse’s board nominated by Hong Kong’s Beijing-backed chief executive, the slap down from the mouthpiece of the Communist party signals growing resistance to the bid.
“The LSE rejection alone would probably have derailed HKEX’s ambitions, but the People’s Daily article surely represents the end of any acquisition hopes,” said Brock Silvers, managing director at Kaiyuan Capital.
LSE Chairman Don Robert released one of the harsher rejections of a corporate takeover offer in recent British memory, issuing a laundry list of geopolitical and business reasons why the LSE finds the $36.8 billion bid wanting. The offer had problems with “strategy, deliverability, form of consideration and value,” he said. The People’s Daily piled it on, signaling that the future of the Hong Kong exchange was linked to China, while also taking a swipe at the popular resistance to China’s increasing control over the city.
“Some people in Hong Kong still have a negative view toward integrating into the development of the nation, as they don’t see what opportunities it brings to Hong Kong,” according to the commentary. “This doesn’t only show how short-sighted it is from an economic perspective, but also how narrow-minded from a political perspective.”
A spokesman for HKEX said the bourse had no immediate comment on the People’s Daily’s article.
Charles Li, the chief executive of the Hong Kong Exchanges & Clearing Ltd, appears undeterred by the LSE’s rejection and is preparing to make his case for the takeover directly to LSE investors. Beyond the political, regulatory and commercial hurdles HKEX faces, the Hong Kong bourse is also demanding LSE walk away from its own
$27 billion deal for data provider Refinitiv.
With the purchase of Refinitiv, the former Thomson Reuters financial and risk business, LSE is seeking to transform itself into a global force in data and trading platforms. The deal is central to its strategy and has proved popular with investors, sending LSE shares surging even before HKEX came knocking.
Ron Arculli, a former HKEX Chairman, said he think LSE’s rejection letter offered HKEX a glimmer of hope. By saying that the initial bid undervalued the UK company, the London bourse may have left “a little crack in the door that may still be open,” Arculli said.