London Stock Exchange Rejects Takeover Bid From Hong Kong Rival

The London Stock Exchange Group Plc (LSE:LON) has rejected a takeover proposal from Asian rival Hong Kong Exchanges & Clearing Ltd., saying the bid has "fundamental flaws."

The board of the 300-year old British stock exchange, which is working on its own deal to buy data provider Refinitiv for $27 billion U.S., said HKEX’s proposed deal had problems in its "strategy, deliverability, form of consideration and value."

HKEX had said that 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% after the announcement in London trading.

The shares initially rose as much as 16% 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 pounds ($36.6 billion U.S.).

The British government has the power to scrap the deal on public-interest grounds. On Wednesday, the government said that the LSE is a "critically important part of the U.K. financial system" and that it would be closely scrutinizing details of any 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 AG. HKEX acquired the London Metal Exchange in 2012.