|Bid||0.00 x 0|
|Ask||0.00 x 0|
|Day's Range||30.14 - 30.28|
|52 Week Range||25.84 - 36.81|
|Beta (3Y Monthly)||1.16|
|PE Ratio (TTM)||31.48|
|Forward Dividend & Yield||0.95 (3.16%)|
|1y Target Est||N/A|
Hong Kong stock exchange boss Charles Li ignited his unrequited overture to the London Stock Exchange with a riff on Romeo and Juliet as a corporate romance, and doused it in a wistful blog reference to the author of 'Alice in Wonderland'. After this week dropping the shock $39 billion approach, will Chief Executive Li's next post outlining a strategic vision for the bourse swap British literary references for a metaphor from a Chinese classic? Investors and analysts expect Hong Kong Exchanges & Clearing (HKEX) to refocus its efforts - for now - on expanding its links with mainland Chinese counterparts following the collapse of its ambitions to build a global exchange platform via a merger with the London Stock Exchange Group (LSE) .
Hong Kong Exchanges and Clearing Limited (HKEX) refrained from sweetening its £29.6 billion (US$36.4 billion) bid to buy the London Stock Exchange Group (LSEG), after its overtures to create one of the world's largest financial marketplaces were spurned by London executives."The board of HKEX continues to believe that a combination of [London Stock Exchange Group] and HKEX is strategically compelling and would create a world-leading market infrastructure group," the Hong Kong operator said in a regulatory statement on Tuesday morning. "Despite engagement with a broad set of regulators and extensive shareholder engagement, the board of HKEX is disappointed that it has been unable to engage with the management of LSEG in realising this vision, and as a consequence has decided it is not in the best interests of HKEX shareholders to pursue this proposal."By not making a so-called formal offer ahead of Wednesday's deadline, the HKEX will not be able to pursue a bid for the London bourse operator for at least six months, according to United Kingdom takeover rules.HKEX shares rose by as much as 2.7 per cent in Hong Kong, in their biggest intraday advance in a month, as investors were relieved that the operator would not raise its financial leverage to buy LSEG. HKEX shares rose to an intraday high of HK$232.20.HKEX has just announced that it will not proceed with an offer for the London Stock Exchange Group. Read the announcement and the thoughts of Chief Executive Charles Li in his latest blog. https://t.co/vnEJLDFMGV pic.twitter.com/Jxv6CwphVn" HKEX 香港交易所 (@HKEXGroup) October 8, 2019The decision was a setback for HKEX's Chief Executive Charles Li Xiaojia, who announced his surprise cash-and-stock bid for LSEG on September 11 at £83.61 per LSE share. Li, a former investment banker at JPMorgan Chase, as the worldwide industry consolidates.The combination of the two exchanges would have created one of the world's largest markets for financial instruments, with an 18 hour trading window that spanned time zones from Asia to Europe, making it more attractive for giants such as Saudi Aramco to raise capital, compared with the New York Stock Exchange and Nasdaq. HKEX was the world's top destination for initial public offerings (IPOs) in six of the past 10 years.Li, a former journalist before he became an investment banker, channelled Lewis Carroll, the much-loved British author of Through the Looking Glass."I don't have a crystal ball, but I'm reminded of Carroll, who once said, 'We only regret the chances we didn't take.' My job as CEO at HKEX is, along with the board and the management team, to make sure we take those chances with our eyes wide-open, balancing risk and opportunity," Li said in a blog post on Tuesday. "I need to be rooted in our day-to-day business but forward-focused, certain that if we try something and it doesn't work, we are strong enough and diverse enough to dust ourselves down and move forward. And today, in the absence of a looking glass, I am as certain as I can be, that we are."Li's unexpected bid for LSEG, unveiled within days of a surprise visit to London, came hot on the heels of the London bourse's US$27 billion bid to buy the financial data provider Refinitiv. The HKEX bid was conditional on LSEG dropping its Refinitiv purchase."The announced offer was already very high, and there is no way for the HKEX to raise it further to satisfy LSEG's shareholders," said Christopher Cheung Wah-fung, a local legislator representing the financial services sector, who is also the founder and chief executive of Christfund Securities."As an HKEX shareholder, I do not support the local bourse wasting its time on another overseas M&A;," said Cheung, whose brokerage received HKEX shares when the exchange operator listed in 2000. "It should instead focus more to strengthen its IPO process to attract more companies engaged in China's Belt and Road Initiative to list here. The only sensible deal would be to collaborate more with the stock exchanges of Shanghai and Shenzhen."To be sure, the London bourse had tried to merge before, but failed to get regulators' approval to combine with the Deutsche Boerse two years ago. US$36.6 billion offer for London Stock Exchange boosts Hong Kong M&A;The London bourse operator rejected the HKEX deal on September 13 in a strongly worded letter, questioning its strategic sense and whether it could receive regulatory approval.At Sibos 2019 in London, on September 24, David Schwimmer, LSE's chief executive, said the exchange preferred Shanghai over Hong Kong as a long-term partner to access the Chinese markets."For the long term? For the financial centre of China? We view Shanghai as the financial centre of China," Schwimmer said. "We value that partnership with the Shanghai Stock Exchange, we think it's mutually beneficial. In June, we launched Shanghai-London Stock Connect, the first of its kind."The Connect scheme, a cross-border investment channel that allows Chinese investors to gain access to European equities via London, and for global investors to trade in Shanghai-listed shares via the LSEG, currently features one Chinese company in Huatai Securities, while China Pacific Insurance said last month it would list in London at a later date. No UK-based company is currently listed in Shanghai.HKEX put on a charm offensive to try to convince LSE shareholders to accept the deal, hiring HSBC and UBS to lobby shareholders directly. Several LSE shareholders urged the Hong Kong bourse operator this month to raise the offer by 20 per cent, according to a Reuters report.Some HKEX shareholders, however, were opposed to a potential improved bid, saying it presented more risk to them, including whether regulators would sign off on the combination."The abandoning of the acquisition of LSE will boost the share price of HKEX, as it means the bourse operator will not need to borrow a huge sum of money for the deal," Gordon Tsui Luen-on, broker and HKEX shareholder, as well as chairman of the Hong Kong Securities Association, said on Tuesday.He said he supported the deal. "HKEX's takeover of LSE would help the local stock exchange to expand its global footprint. However, I would not have agreed to further raising the offer price, as that would mean the HKEX would have to shoulder more debt than the original proposal, which might add to HKEX's the financial burden," Tsui said."The HKEX might consider other acquisition targets for expanding its business in the future," he added. Hong Kong may have lost US$4 billion to Singapore during protests: reportThe bid for LSE came as Hong Kong has faced one of its worst political crises this summer, one that has raised questions about its future as an international financial centre.Protesters have taken to the streets over the past four months to demonstrate against a controversial extradition bill that would have made it easier to send criminal suspects to mainland China for trial.The bill has been formally withdrawn, but the protests " marked by increasingly violent clashes between demonstrators and police " have evolved into a larger discussion about income inequality, affordable housing and China's growing influence over the city.At the same time, the UK is undergoing its own political crisis as it prepares to exit the European Union, possibly as soon as the end of this month. Questions remain about whether the UK will seek an extension, or crash out of the 28-nation bloc with no agreement.This article originally appeared in the South China Morning Post (SCMP), the most authoritative voice reporting on China and Asia for more than a century. For more SCMP stories, please explore the SCMP app or visit the SCMP's Facebook and Twitter pages. Copyright © 2019 South China Morning Post Publishers Ltd. All rights reserved. Copyright (c) 2019. South China Morning Post Publishers Ltd. All rights reserved.
its rival and its shareholders were unmoved by a three-week charm offensive Hong Kong launched to persuade them. Charles Li, chief executive of HKEX, said the board had concluded an offer was not in the best interests of its own shareholders.
London Stock Exchange Group shares stumbled 6% after Hong Kong Exchanges & Clearing said "it is not in the best interests of HKEX shareholders to pursue" its takeover bid. The LSE had said it was opposed to the offer.
(Bloomberg Opinion) -- That was quick. Workers in Hong Kong’s finance industry returned to the office after a long weekend of violent protests to find that their stock exchange has decided not to pursue a takeover bid for its London counterpart.The limp end to its month-long courtship has left Charles Li, chief executive officer of Hong Kong Exchanges & Clearing Ltd., looking rather silly. One can’t help wondering if the exchange has any leadership, vision or ambition left. The same can’t be said of London Stock Exchange Group Plc. By bidding for Refinitiv, the LSE is taking on a lot of risk. On completion of the deal, the exchange’s net-debt-to-Ebitda ratio would rise to 3.5 times, well above the 1 to 2 times range that its management deems comfortable. It will take the LSE more than two years to bring its debt level back down – and even that estimated time scale is seen as ambitious by analysts. Yet the London exchange is charging ahead, in the face of Brexit and a deteriorating global economic outlook, to diversify away from trading revenue that’s being eroded by the rise of passive investing.HKEX’s pursuit was half-hearted at best. With a squeaky-clean balance sheet, the company could have done a lot more. If it had been willing to bring its leverage ratio to the same level that LSE is tolerating, HKEX would have had more than $18 billion in cash to sweeten its offer. While LSE management was scathingly dismissive of the HKEX offer, many of its shareholders might well have been tempted – especially if the Hong Kong exchange had increased the cash component of its bid. After all, immediate cash-on-hand is always appealing for passive fund managers, which account for almost all of LSE’s ownership. What’s left for Hong Kong? The 200,000-odd finance professionals employed in the city will be asking themselves. HKEX CEO Li, who earned HK$29 million ($3.7 million) last year, likes to talk up Hong Kong as the gateway for foreign capital to China. Reality suggests otherwise. Wary that the Trump administration will limit U.S. investments into China, American fund managers are already tiptoeing away. They got their latest warning on Monday, when Hangzhou Hikvision Digital Technology Co. was placed on a U.S. blacklist. In 2018, foreigners owned more than 10% of the surveillance camera maker. Local retail and institutional investors accounted for only 30% of HKEX trading last year, according to the exchange. Americans are the second-largest outside investors, after those from mainland China, accounting for 10% of Hong Kong’s total trading. The actual number is likely to be quite a bit higher, as U.S. banks also trade Hong Kong stocks using their principal accounts. Billions of dollars will flee as U.S.-China trade tensions escalate. Those still brave enough to stick around may look to the mainland market instead. China’s announcement that it will remove quotas on buying Chinese stocks and bonds in September is a clear sign that Beijing is looking for an onshore alternative to Hong Kong. There’s something to be said for the Chinese market: While the Shanghai and Shenzhen exchanges are near par with Hong Kong by market cap, stocks there are a lot more liquid.At times of economic distress in the mainland, state-owned enterprises routinely perform national service, piling on debt to build roads to nowhere and provide employment. With almost half its board appointed by the Hong Kong administration and its chairman picked by the city’s chief executive, HKEX has the characteristics of a local government financing vehicle in China. So why is the exchange so timid in its drive to maintain Hong Kong’s relevance as a financial center? HKEX shareholders may be cheering after it dropped the LSE bid. Many finance workers won’t be. To contact the author of this story: Shuli Ren at firstname.lastname@example.orgTo contact the editor responsible for this story: Matthew Brooker at email@example.comThis column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.Shuli Ren is a Bloomberg Opinion columnist covering Asian markets. She previously wrote on markets for Barron's, following a career as an investment banker, and is a CFA charterholder.For more articles like this, please visit us at bloomberg.com/opinion©2019 Bloomberg L.P.
(Bloomberg) -- Bankers had a tough time in recent weeks trying to decide whether to support Hong Kong Exchanges & Clearing Ltd.’s bid for its London counterpart. In the end, before many of them made up their minds, the deal fell apart.HKEX said on Tuesday it won’t proceed with its 29.6 billion-pound ($36.4 billion) unsolicited takeover bid for London Stock Exchange Group Plc. While HKEX’s board continues to see a combination as “strategically compelling,” it’s “disappointed that it has been unable to engage with the management of LSEG in realizing this vision,” the exchange said.A successful deal would have marked the biggest transaction out of Asia during a slow year for M&A, something that would normally send banks flocking to the buyer’s side to try and get a slice of the action. But in this case, the long-term risks of supporting an unsolicited offer could have proved higher.HKEX had been discussing borrowing between 7 billion pounds and 8 billion pounds to back its proposed takeover, Bloomberg News reported last month. Lenders considering whether to join the financing have been weighing the likelihood that the deal will turn hostile after London Stock Exchange Group Plc’s initial rejection, people with knowledge of the matter said.Finding funding for a successful takeover would have relied on explaining the sound foundation of the deal to both shareholders and regulators, according to Randy Kroszner, a professor at The University of Chicago Booth School of Business.“In very high profile deals where there is often politics involved, like exchanges, banks must get the balance right,“ said Kroszner, who is also deputy dean for Chicago Booth’s executive programs. “They must be sure to provide the best advice they can, and offer a sound basis in terms of pricing and deal structure to ensure a reasonable outcome.”Banks typically prefer to work on friendly, agreed deals as hostile transactions can end up hurting long-term relationships with prospective clients. Some banks that had spoken to HKEX were concerned that joining the funding may have jeopardized future work for Blackstone Group Inc., one of Wall Street’s biggest fee payers, according to the people.That’s in addition to any potential damage they were considering to their relationship with LSE, the people said, asking not to be identified because the information is private. HKEX’s bid was conditional on LSE dropping its own $27 billion acquisition of Blackstone-backed data provider Refinitiv.Potential FeesAt stake was up to $100 million in fees that banks could have earned from the Hong Kong bourse operator, according to New York-based consulting firm Freeman & Co. HKEX could have paid out fees of as much as 0.5% of the financing package’s value to banks providing initial funding for the deal, in addition to roughly $30 million to $50 million in M&A advisory fees, Freeman estimates.A representative for HKEX declined to comment on the challenges of the financing when Bloomberg News reached out on Monday.A successful takeover would have turned into one of the biggest global deals of the year and help lift volumes in Asia and Europe. Announced mergers and acquisitions involving Asian companies are down 23% this year to $735.4 billion, while deal volumes are down 20% in Europe to $822.5 billion, data compiled by Bloomberg show.HKEX has been advised on the bid by Moelis & Co. It later added UBS Group AG and HSBC Holdings Plc to its stable of advisers and used Credit Suisse Group AG to arrange some meetings with LSE investors, people with knowledge of the matter said last month. Goldman Sachs Group Inc., Morgan Stanley and Robey Warshaw have been lead advisers to LSE, which has also been working with Barclays Plc and corporate broker Royal Bank of Canada.(Updates with HKEX’s decision to walk away from deal in second paragraph)\--With assistance from Jan-Henrik Förster.To contact the reporter on this story: Manuel Baigorri in Hong Kong at firstname.lastname@example.orgTo contact the editors responsible for this story: Fion Li at email@example.com, Ben Scent, Ville HeiskanenFor more articles like this, please visit us at bloomberg.com©2019 Bloomberg L.P.
Hong Kong's bourse on Tuesday scrapped its unsolicited $39 billion approach for London Stock Exchange Group (LSE) after failing to convince LSE management to back a move that could have transformed both global financial services giants. The Hong Kong exchange had said the LSE would have to ditch the Refinitiv purchase for its offer to go ahead.
Hong Kong's bourse has scrapped its unsolicited $39 billion approach for London Stock Exchange Group after failing to convince LSE management and investors to back a move that could have transformed both global financial services giants. Last month's surprise cash-and-shares approach threatened to upend the LSE's $27 billion plan to buy data and analytics firm Refinitiv. The Hong Kong exchange had said the LSE would have to ditch the Refinitiv deal for its offer to go ahead.
On a sunny day in September 2018 the directors of Hong Kong's stock exchange gathered in a hotel meeting room to discuss the best way to take the bourse forward. They reached a bold decision " they would try to buy the London Stock Exchange (LSE) to create a giant trading framework that bridges east and the west.The meeting, which lasted a whole day, covered every aspect of a three-year strategic plan (2019 - 2021) for the exchange, according to a source who wished to remain anonymous. It included a range of suggestions to add new products and measures to boost the status of the exchange, to make it the leading asset management platform in Asia and bolster its role as a gateway for mainland China investment.It was during this conference that Charles Li Xiaojia, chief executive of Hong Kong Exchanges and Clearing, and some of his advisers presented the idea of using mergers and acquisition as a short cut for the bourse operator to diversify its business model away from a focus on the initial public offerings of Chinese companies.The HKEX, however, did not act immediately on its plan to buy its London counterpart and may now have missed the boat."It is much harder for the HKEX to proceed with the LSE acquisition now than a year ago given the global economic situation. Most importantly, the anti-government protests in recent months have hit market turnover hard as well as the international image of Hong Kong," said Clement Chan Kam-wing, managing director of accounting firm BDO.It wasn't until September 11 this year that HKEX surprised the market with an unsolicited offer of US$36.6 billion in cash and new shares to acquire the centuries-old LSE.The local bourse, which operates Asia's third-largest market, must now make a formal offer " possibly an improved one " before a deadline at close of business next Wednesday (October 9), according to the UK takeover code. If passed, it would be the largest exchange merger in history. HKEX shareholders voice concern against raising bid for LSEWhile HKEX needed a year to turn its idea into action, it took the LSE board just two days to reject the offer, saying it preferred Shanghai Stock Exchange as its partner giving it access to the mainland Chinese market. In a brutal rebuttal, the LSE also raised questions about the future of the Hong Kong exchange as a gateway to China as violent anti-government protests that have plagued the city for almost four months show no signs of ending.HKEX has not given up and has hired HSBC and UBS to help lobby shareholders of the LSE. The deal will need to get approval from shareholders of both bourses as well as regulators in the UK, the US, Italy, France and Europe.Some LSE shareholders are demanding the HKEX raise its offer price by 20 per cent, according to a Reuters report on Friday morning, while some HKEX shareholders told the Post that they would object to taking the price much higher.But why was HKEX so keen to take over LSE in the first place? It has to do with that meeting a year ago.HKEX has successfully built a world-leading IPO market that has ranked top of the global league table six times in the past decade. But it heavily relies on mainland Chinese companies.In fact, Chinese firms represented 68 per cent of market cap and 95 per cent of all funds raised through IPO in Hong Kong last year."With mainland China gradually opening its markets to international investors, the role of Hong Kong as a gateway to China will be eroded in the long term. HKEX will [therefore] need to diversify its business models to have different products and markets. M&A; with the right target would be a short cut to achieve such a goal," said a source familiar with what went on at the meeting.The source said the £1.39 billion purchase in 2012 of the London Metal Exchange (LME), for example, had proved successful in helping HKEX to step into commodities trading.The 13 board members of the HKEX, and their advisers, discussed several potential targets and concluded the most ideal one was the London Stock Exchange."London Stock Exchange has a strong clearing business while it is also strong in technology and data businesses. It operates in a different time zone while it has little overlap with the HKEX business," the source said.The HKEX, however, did not put the purchase plan into action immediately because it wanted to wait and see how Brexit " Britain's bid to leave the European Union " panned out, the source said. The UK's departure was initially scheduled for the end of March this year.This wait-and-see approach may have caused the HKEX to miss the best time to pounce, because a year on, the global and local economies are in a slide. The Brexit process is still dragging on while the US-China trade war that started over a year ago has only escalated.Back home, and Hong Kong was riding high a year ago. It had just launched the high-speed train connecting to mainland cities as well as the Hong Kong-Zhuhai-Macau Bridge to bring thousands of mainland tourists to Hong Kong. These new transport infrastructure were credited with helping drive up third-quarter GDP growth last year to 2.9 per cent.Fast forward a year, and things are very different in Hong Kong.The huge anti-government protests that started on June 9 have driven away tourists and savaged retail sales, with Financial Secretary Paul Chan Mo-po last month warning that the city may go into a technical recession in the third quarter.A year ago, HKEX enjoyed the advantage of being the only market worldwide to have two stock connect schemes, linking it to Shanghai and Shenzhen. But in June this year, LSE launched its own version of the scheme with the Shanghai Stock Exchange.HKEX's Li, a former investment banker and a veteran dealmaker, disagrees that the deal is badly timed."In reality, there is seldom a perfect time to undertake a merger or acquisition," he wrote on his personal blog when he announced the LSE bid. "Given the current uncertainties in global geopolitics and economics, you could be forgiven for thinking that the time would not be now to make a major investment in a cross-border acquisition."However, this is a highly compelling transaction that stands up on its own, whatever the noise, and if we do not try, then of course by definition we fail."Li, who has been the CEO since January 2010 and led the HKEX to its first overseas acquisition by spending £1.39 billion on the London Metal Exchange (LME) in 2012, has a strong belief in the deal."Together, they will create a world-leading global exchange that spans Asia, Europe and the United States with a market value of more than US$70 billion," he said.Laurence Li Lu-jen, chairman of the Financial Services Development Council (FSDC), a government-appointed industry promoter, shares his view."It is very brave for the HKEX to propose a marriage between HKEX and LSE. It makes sense to bring the strength of the two exchanges together," he said. "It is such a large deal, so it needs a lot of time to study before taking into action."He also believes the LSE would benefit from the merger, with HKEX as a gateway to China.The two stock connect schemes between Hong Kong and the mainland bourses cover more than 2,000 stocks and allow investors to carry out billions of dollars in cross-border trading. The LSE-Shanghai connect structure is like a cross-listing, currently with only one mainland Chinese stock traded on the UK exchange, the chairman of the FSDC said.The HKEX's decision to make its audacious bid last month was triggered when the LSE announced in August it would spend US$27 billion to acquire data company Refinitiv, which is 55 per cent owned by Blackstone Group and 45 per cent by Thomson Reuters.The HKEX offer comes with the condition that the LSE would need to give up the Refinitiv acquisition. But the LSE board said it considered the HKEX offer too low and would stick to its plan to pursue the deal with Refinitiv, to be completed in the second half of next year."If LSE would have completed the acquisition of Refinitiv, it would have enlarged its operations in the US. This would make it impossible for the HKEX to acquire the LSE as the deal would be subject to more US regulatory approval," the HKEX source said.HKEX chairwoman Laura Cha Shih May-lung said: "A combination of HKEX and LSE represents a highly compelling strategic opportunity to create a global market-infrastructure group, bringing together the largest and most significant financial centres in Asia and Europe."What Cha said was broadly true, as the two bourses bring very different strengths to the table.As IPO markets, HKEX is by far the stronger. It has beaten LSE in terms of both the number of IPOs and the amount raised over the past 10 years. Hong Kong was ranked the top IPO market worldwide six times over the past decade, while LSE has languished between third and eighth place, once slipping as low as 22nd, according to data from Dealogic.But LSE has a far more diversified business. In 2018, it generated 38 per cent of its income from post-trade services such as clearing and settlement via its 82.6 per cent-owned LCH, which clears half of the world's interest rate swaps. Forty per cent if its income comes from its information services, such as leading global index provider FTSE Russel Indexes. London Exchange strongly rejects Hong Kong's surprise takeover bidCapital markets only accounted for 13 per cent of LSE's income in 2018, in contrast to the HKEX which garnered 46 per cent of its income comes from stocks and derivatives trading."The deal is logical as HKEX and LSE are highly complementary in businesses. HKEX is strong in stocks and derivatives trading and IPO while LSE is strong in fixed income, foreign exchange and offshore US-dollar settlement centres," said Kenny Ng, Lai-yin, securities strategist at Everbright Sun Hung Kai."If I was a shareholder of HKEX, I would agree to the transaction. If I was a shareholder of LSE, I would consider further negotiations with HKEX for better returns," Ng said.HKEX offered to pay £83.61 per LSE share in cash and stock. LSE's share price shot up 16 per cent at the time of the offer. It traded at around £73.38 on Friday morning, up 7.8 per cent from before the bid. HKEX closed at HK$226 on Friday, down 8.1 per cent since announcing the offer.This article originally appeared in the South China Morning Post (SCMP), the most authoritative voice reporting on China and Asia for more than a century. For more SCMP stories, please explore the SCMP app or visit the SCMP's Facebook and Twitter pages. Copyright © 2019 South China Morning Post Publishers Ltd. All rights reserved. Copyright (c) 2019. South China Morning Post Publishers Ltd. All rights reserved.
Some shareholders of Hong Kong Exchanges and Clearing (HKEX) are opposed to the local bourse further raising its bid for London Stock Exchange, saying a higher bid would mean additional risks for them.Earlier on Friday, three shareholders of the London bourse said they could be drawn into further discussions if the HKEX raises its offer price by 20 per cent and increases the cash component."I will definitely oppose the HKEX from raising its offer for the LSE as it will become too expensive," said Christopher Cheung Wah-fung, a lawmaker for financial services sector, and an HKEX shareholder.Cheung and about 500 local brokerages received shares of HKEX when it was listed in 2000.Christopher Cheung Wah-fung, lawmaker for financial services, says that as an HKEX shareholder he opposes a higher bid for LSE. Photo: Nora Tam alt=Christopher Cheung Wah-fung, lawmaker for financial services, says that as an HKEX shareholder he opposes a higher bid for LSE. Photo: Nora TamThe HKEX will have to convince these shareholders about the merits of a higher takeover offer."The deal is full of uncertainties as we do not know if the regulators in the UK, US and Europe will approve, and we do not know if the combination of the two exchanges will work out smoothly," said Cheung, who is also the founder and chief executive of Christfund Securities. Hong Kong's bold bid for London Stock Exchange faces scrutiny of global regulators"As such, the current proposal means the HKEX shareholders have to face risks. I will certainly oppose raising the bidder higher as it would add to the risks."The HKEX on September 11 surprised the market by proposing to pay £83.61 per LSE share in cash and stock for the London bourse operator, valuing it at £29.6 billion (US$36.6 billion). It is the most expensive exchange takeover offer and could create a giant exchange that would span Asia, Europe and America.The LSE immediately rejected the unsolicited approach, saying it faced regulatory hurdles and did not make strategic sense.But the HKEX has not given up and has hired HSBC and UBS to lobby the shareholders of LSE directly. HKEX needs to make a formal offer by 5pm next Wednesday. Some LSE shareholders on Friday urged the Hong Kong bourse operator to raise the offer by 20 per cent, according to a Reuters report.Guy de Blonay, manager of the Jupiter Financial Opportunities Fund and a major LSE shareholder, said the HKEX would have to increase the per share price to between £90-100, up from the initial approach of around £83.61 for shareholders to take it seriously.De Blonay told the Post by email that he wanted to see a revised offer from HKEX."Like many shareholders, I do not feel the current offer on the table from the HKEX for the LSE fully reflects the value and future potential earnings the combined entity would likely achieve ... That said, were we to see a revised headline price and an improvement in the cash component from HKEX, that would likely catch the attention of LSE shareholders," de Blonay said.Charles Li, chief executive of HKEX, is leading the efforts to acquire LSE. Photo: Jonathan Wong alt=Charles Li, chief executive of HKEX, is leading the efforts to acquire LSE. Photo: Jonathan Wong"[HKEX chief executive] Charles Li knows this is a one-off opportunity, and I would expect him to carry on fighting," de Blonay was quoted as saying in the Reuters report.Wilfred Wong, another veteran local broker, was also opposed to the HKEX increasing the price further.Tom Chan Pak-lam, chairman of the Institute of Securities Dealers and chief executive of Success Finance Group, said it was natural to see negotiations in any deal."Our brokerage house still owns shares of HKEX. We support the HKEX to use M&A; to diversify and expand the business," Chan said.An HKEX spokesman said he had no comment on whether the bourse operator planned to raise its bid.A government spokesman declined to comment on its voting decision as a shareholder. The Hong Kong government is the largest single shareholder of the HKEX as it owns a 6 per cent stake through the Exchange Fund."The government is glad to see HKEX's endeavour to enhance its core strength and seek international expansion in accordance with its strategic plan. We do not comment on market speculation," a government spokesman replied to an email query.The HKEX-LSE takeover will also need the approval of LSE and HKEX shareholders and regulators in the UK, US, France, Italy and Europe.This article originally appeared in the South China Morning Post (SCMP), the most authoritative voice reporting on China and Asia for more than a century. For more SCMP stories, please explore the SCMP app or visit the SCMP's Facebook and Twitter pages. Copyright © 2019 South China Morning Post Publishers Ltd. All rights reserved. Copyright (c) 2019. South China Morning Post Publishers Ltd. All rights reserved.
Some London Stock Exchange investors have told Hong Kong Exchanges and Clearing (HKEX) that any bid must contain more cash and be up to 20% higher to persuade them to engage, three shareholders and a banking source close to the deal said. The three investors, who own a combined 3% of LSE, said HKEX has been lobbying them to back a potential $39 billion cash and share offer for the London exchange after it made a surprise approach last month. LSE quickly rejected HKEX's initial approach, saying it faced regulatory hurdles and did not make strategic sense.
(Bloomberg) -- Hong Kong Exchanges & Clearing Ltd. is in talks with banks for a loan to back its proposed takeover bid for London Stock Exchange Group Plc, people familiar with the matter said.The bourse has been discussing borrowing between 7 billion pounds and 8 billion pounds ($9.8 billion), according to the people, who asked not to be identified because the information is private. It’s seeking to form a syndicate of several lenders, the people said.Under U.K. takeover rules, HKEX must submit a formal offer by Oct. 9 unless LSE grants an extension. Executives from the Hong Kong exchange are in London last week, meeting with LSE shareholders to convince them of the merits of the deal, which is known internally at HKEX as “Project Lima,” according to the people.As part of its proposal, the Hong Kong bourse is demanding LSE walk away from its own $27 billion deal for data provider Refinitiv. A total of 18 banks signed a $13.5 billion bridge loan this month for that acquisition.Shares of HKEX rose as much as 2.3% during Monday morning trading in Hong Kong, while the benchmark Hang Seng Index was little changed.LSE earlier this month rejected HKEX’s 29.6 billion-pound takeover proposal, citing complications ranging from Hong Kong’s unrest to potential problems with regulators. HKEX is counterattacking with a charm offensive, bringing in UBS Group AG and HSBC Holdings Plc to convince shareholders of the merits of its own proposal, Bloomberg News reported last week.In a note Thursday, a Sandler O’Neill & Partners analyst said his firm hosted an investor meeting with HKEX Chief Executive Officer Charles Li and co-President Romnesh Lamba this week. The executives emphasized the merits of combining an Asian exchange with a European counterpart, given little overlap in their respective capabilities, the note said.HKEX is concerned that LSE will try to “run out the clock” before the Oct. 9 deadline, given the target’s lack of cooperation so far, the Sandler O’Neill note said.Some of the Hong Kong firm’s pitches to the U.K. company’s investors have been met with ambivalence so far, the people familiar with the matter said, as some fund managers told HKEX that they like LSE’s Refinitiv deal and HKEX’s bid isn’t high enough.No final agreements have been reached, and details of the financing could still change, the people said. A representative for HKEX declined to comment.(Adds HKEX share performance in fifth paragraph.)\--With assistance from Jan-Henrik Förster and Carol Zhong.To contact the reporters on this story: Manuel Baigorri in Hong Kong at firstname.lastname@example.org;Annie Lee in Hong Kong at email@example.com;Viren Vaghela in London at firstname.lastname@example.orgTo contact the editors responsible for this story: Fion Li at email@example.com, ;Neha D'silva at firstname.lastname@example.org, Keith Campbell, Marion DakersFor more articles like this, please visit us at bloomberg.com©2019 Bloomberg L.P.
The bosses of the Hong Kong and London stock exchanges got into a war of words on Tuesday when fate brought them together at the same event in the midst of a bitter takeover battle.Less than two weeks after the London Stock Exchange (LSE) issued a stern rebuttal of Hong Kong's unexpected US$36.6 billion bid, the two men clashed during back-to-back sessions at a financial conference in the British capital.At issue were Hong Kong's status as a financial gateway to China and whether Beijing's tight control over money leaving the country " something Hong Kong's role relies on " will soon be a thing of the past.Speaking first at the Sibos 2019 event, David Schwimmer, chief executive of the London Stock Exchange, continued where a rejection letter penned by the LSE chairman left off. He reiterated the UK exchange's preference for Shanghai over Hong Kong as a partner providing access to Chinese markets. HKEX makes US$36.6 billion surprise bid for London Stock Exchange"For the long term? For the financial centre of China? We view Shanghai as the financial centre of China," Schwimmer said. "We value that partnership with the Shanghai Stock Exchange, we think it's mutually beneficial. In June we launched Shanghai-London Stock Connect, the first of its kind."The stock connect scheme allows China's domestic shares to list in the form of global deposit receipts on LSE and raise capital in international markets."We view the capital controls around the Chinese market as constantly evolving, and the trend is that they are slowly but surely being removed," Schwimmer said.Charles Li Xiaojia, chief executive of Hong Kong Exchanges and Clearing Limited (HKEX), speaks on August 19. Photo: Jonathan Wong alt=Charles Li Xiaojia, chief executive of Hong Kong Exchanges and Clearing Limited (HKEX), speaks on August 19. Photo: Jonathan WongBeijing's strict capital controls enable Hong Kong, which allows free flow of capital, to act as a gateway for foreign investment to enter into the mainland market.Charles Li Xiaojia, chief executive of Hong Kong Exchanges and Clearing, the operator of Asia's third-largest stock exchange, spoke immediately after Schwimmer, in a separate session at the event attended by some 8,000 delegates.He responded by dismissing his counterpart's optimism about capital controls, and reaffirmed his belief that Hong Kong can continue in its role as gateway to China."The idea China will relax controls ... we will still be talking about it for 20 years. Capital controls will be with us for our generation," Li said. Hong Kong's bold bid for LSE faces scrutiny of global regulatorsHe highlighted the fact Hong Kong's stock market has acted as a hub for Chinese companies to raise funds for far longer than London has."I wish we had patented the word 'connect' when we did it. We did that 25 years ago, today we have 500 massive Chinese companies listed in Hong Kong," he said, referring to the H-shares programme started in July 1993 for mainland companies raise funds in Hong Kong.HKEX started the Hong Kong-Shanghai stock connect in November 2014 and expanded the concept to Shenzhen two years later. The schemes allow cross-border trading of over 2,000 stocks from the three markets. HKEX's bid for London is no big deal amid a trend of consolidationsSchwimmer, on the other hand, disclosed that one Chinese company had joined the London-Shanghai connect so far, with another one "in the pipeline".China Pacific Insurance on Tuesday said it planned to list on LSE at an undisclosed time, becoming the second company listed under the connect scheme, after Huatai Securities' flotation in June.On September 11, HKEX surprised the market by making an unsolicited takeover bid for LSE, offering US$36.6 billion for the centuries-old exchange.LSE's board of directors rejected it two days later. But HKEX is not giving up and has hired investment banks UBS and HSBC to lobby shareholders of LSE to accept the offer, according to a Bloomberg report.David Schwimmer, chief executive officer of London Stock Exchange Group (centre) pictured in October last year. Photo: Bloomberg alt=David Schwimmer, chief executive officer of London Stock Exchange Group (centre) pictured in October last year. Photo: BloombergLi said at the event on Tuesday that it was the "best time" to combine with the LSE, though he recognised the improbability of the deal."If I stand in David's shoes, I will reject Charles Li," Li said, striking a humorous tone."We think it's time to think big. This is the time in our view when the world is becoming more polarised from east to west. We need to have an unrivalled global financial infrastructure across all global currencies and all time zones."London Exchange rejects Hong Kong's surprise takeover bid in strongly worded endorsement of Shanghai as 'preferred partner'If it were to go through, the HKEX-LSE deal would need approval from shareholders of both exchanges as well as regulators in the UK, the US, and Europe. The structure of HKEX, over which the Hong Kong government has a strong influence, is a key concern.Hong Kong government is the largest shareholder, with a 6 per cent stake. Half of the board is appointed by the government, while the shareholders select the rest."We have a slightly unusual governance structure. Today if this transaction is approved, we would have created a global company. The structure could have been completely different. Everything is open to discussion," Li said.Hong Kong Exchanges and Clearing's unsolicited takeover bid for the London Stock Exchange Group was met with a stern rebuttal. Photo: Paul Yeung/Bloomberg alt=Hong Kong Exchanges and Clearing's unsolicited takeover bid for the London Stock Exchange Group was met with a stern rebuttal. Photo: Paul Yeung/BloombergWhile many attempts at cooperation between American and European exchanges had failed to work, Li said the key difference was that in those cases the opportunity was not incrementally increasing."Synergy can only go so far. But here we are talking about unlocking a frontier [between London and Hong Kong]," Li said.The HKEX's unsolicited offer required LSE to give up its US$27 billion offer to buy data company Refinitiv. But Schwimmer is sticking with that deal."The Refinitiv transaction is very helpful for us in Asia in China specifically. Refinitiv is in 190 countries, it has a substantial presence in China, but also operates in many other countries. So with the transaction we will transform into a truly global market including a very strong presence in serving customers in China," he said.This article originally appeared in the South China Morning Post (SCMP), the most authoritative voice reporting on China and Asia for more than a century. For more SCMP stories, please explore the SCMP app or visit the SCMP's Facebook and Twitter pages. Copyright © 2019 South China Morning Post Publishers Ltd. All rights reserved. Copyright (c) 2019. South China Morning Post Publishers Ltd. All rights reserved.
(Bloomberg Opinion) -- The world’s biggest brewer should raise a glass to Singapore.Anheuser-Busch InBev NV can probably thank the city-state’s sovereign wealth fund for saving its Asian unit’s Hong Kong initial public offering from an ignominious second failure. GIC Pte committed to invest $1 billion in Budweiser Brewing Company APAC Ltd., which raised about $5 billion after pricing its shares at the bottom of a marketed range.In July, AB InBev pulled a $9.8 billion sale that would have been the world’s largest IPO this year after struggling to draw enough orders at the valuation sought. On that occasion, Budweiser Brewing eschewed the common Hong Kong practice of setting aside a block of stock for so-called cornerstone investors – companies, institutions or wealthy individuals that commit to invest and hold their shares for a minimum period, signaling confidence in a listing’s prospects to the wider public.A successful Budweiser Brewing offering in July would have dealt a blow to the cornerstone custom, as I observed then. Instead, it was the company that suffered. This time around, it went the conventional route.Just as well. Despite halving its fundraising target, the company failed to create much buzz. Its valuation again looks to have been ambitious. At the bottom of the price range, Budweiser Brewing was priced at 17 times estimated 2020 enterprise value to Ebitda. That compares with 18.5 times for China Resources Beer Holdings Co., maker of the country’s best-selling Snow brand. Arun George, an analyst who writes on Smartkarma, estimated Budweiser Brewing should trade at 16 times EV/Ebitda.After the collapse of the July IPO, AB InBev sold the unit’s Australian business for $11.3 billion to Asahi Group Holdings Ltd. That enabled bankers to pitch the pared-down business as a growth play focused more tightly on developing Asia, particularly China. AB InBev has 46.6% of the market of the market for premium and super-premium beer in China, more than triple the share of nearest rival Tsingtao Brewery Co. The share of 2018 Ebitda drawn from the company’s Asia Pacific West region – comprising China, India and Vietnam – rose to 72% from 50% after the Australian sale, according to Bernstein Research.However, that still leaves a substantial chunk of earnings contributed by a slower-growing Asia Pacific East region that includes South Korea, Japan and New Zealand. In that light, the support of a heavyweight investor such as GIC may have made the difference in getting Budweiser Brewing over the line.The irony of Singapore riding to the rescue won’t have been lost on Hong Kong Exchanges & Clearing Ltd. The rival Asian financial center stands to gain more than most from the political turmoil and U.S.-China trade tensions that have weighed on the Hong Kong stock exchange. A successful Budweiser Brewing listing may be critical in shoring up investor sentiment for a pipeline of IPOs to come that includes the lucrative secondary listing of Alibaba Group Holding Ltd.That still depends on how the stock performs once it starts trading, scheduled for Sept. 30. Keep the beer on ice until then. To contact the author of this story: Nisha Gopalan at email@example.comTo contact the editor responsible for this story: Matthew Brooker at firstname.lastname@example.orgThis column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.Nisha Gopalan is a Bloomberg Opinion columnist covering deals and banking. She previously worked for the Wall Street Journal and Dow Jones as an editor and a reporter.For more articles like this, please visit us at bloomberg.com/opinion©2019 Bloomberg L.P.
Initial public offerings (IPOs) are returning to Hong Kong, as valuations have bottomed out after a dismal summer disrupted by the worst political crisis in the city's history, underscoring the resilience of Asia's financial hub as the go-to option for fundraising, said one of the largest local brokers.As many as 16 companies applied to raise funds on the local bourse in the first three weeks of September, increasing the number of active applications by 7 per cent to 231 in the year to date, according to data by the Hong Kong Exchanges and Clearing Limited (HKEX), the market operator. They are open to launch their IPOs, pending approvals by the HKEX."Many clients are returning to the market in September after a quiet summer," said Kenneth Ho Shiu-pong, the equity market managing director at Haitong International Securities Company, which arranged 37 IPOs worth US$1.59 billion last year, and underwrote 28 fundraising deals valued at US$704.77 million this year. "Hong Kong remains the top fundraising destination for mainland Chinese and Asian companies that want to capture the international investors."Hong Kong's economy is teetering on the brink of a technical recession, as three months of political rallies that began on June 9 have deteriorated into street mayhem and violence, causing property prices to plunge, forced visitors to stay away and crimped retail sales. Up to 10 of the city's smallest brokers have shuttered, as dwindling transactions made it too expensive for them to maintain their operations, according to the industry's association.Still, the city's benchmark Hang Seng Stock Index fell by 6.2 per cent at the worst of the crisis, recovering to a 2 per cent dip as at the end of Friday's trading. That has been worse than Hong Kong's previous political crisis during the Occupy Central movement in 2014, when the city's central business district was almost paralysed by 79 days of sit-ins and protests."Hong Kong remains the top destination for IPOs, based on its strong fundamentals, despite a number of uncertainties affecting the market's sentiment, and some IPO applicants adopting a more cautious, wait-and-see approach to proceed with their listings," said KPMG China's head of capital markets Paul Lau.SCMP Graphics alt=SCMP GraphicsBudweiser Brewing Company APAC Limited, the regional unit of the world's largest beer producer, last week revived its fundraising plan by halving the amount of capital raised to US$4.8 billion. Still, that makes it the world's second-biggest IPO this year. ESR Cayman and several other companies also dusted off their shelved plans.Gloom and doom prevailed during the summer months, when Budweiser, ESR Cayman and others shelved their IPO plans, which would have raised a combined US$11.05 billion in Hong Kong, and helped the local bourse catch up with New York and Nasdaq in the annual race to be the world's fundraising capital.The tide turned after Hong Kong's Chief Executive Carrie Lam Cheng Yuet-ngor caved in to public demand on September 4 and withdrew the controversial extradition bill that sparked the protests in the first place.SCMP Graphics alt=SCMP GraphicsBudweiser is expected to set a final price for its IPO at the end of today. Inclusive of its US$4.8 billion stock sale, Hong Kong's fundraising tally is projected at US$16 billion from 84 IPOs, putting it third globally behind New York Stock Exchange and Nasdaq, according to Refinitiv data. Hong Kong was the world's favourite fundraising destination in six of the past 10 years.There were "positive signs from the number of main board deals in the first three quarters comparable to last year, and the number of new main board applicants in July and August increased by about 30 per cent," KPMG's Lau said. "Hong Kong is likely to remain in the top three globally in terms of total funds raised for 2019."Consumer stocks, biotechnology and telecommunications remained the darlings of international investors, according to Haitong's Ho, adding that come clients " particular those with business models that are more likely to be better received in the US " would still prefer to list in New York. Haitong helped arrange Luckin Coffee's US$561 million Nasdaq IPO in May."Luckin Coffee is a Chinese version of Starbucks, so we received very strong investor demand globally, especially in the US, as expected," Ho said.This article originally appeared in the South China Morning Post (SCMP), the most authoritative voice reporting on China and Asia for more than a century. For more SCMP stories, please explore the SCMP app or visit the SCMP's Facebook and Twitter pages. Copyright © 2019 South China Morning Post Publishers Ltd. All rights reserved. Copyright (c) 2019. South China Morning Post Publishers Ltd. All rights reserved.
(Bloomberg) -- Hong Kong Exchanges & Clearing Ltd. has started working with UBS Group AG as it begins its charm offensive to convince London Stock Exchange Group Plc investors on the merits of its takeover bid, people familiar with the matter said.The Swiss bank has been brought in as an adviser and is helping HKEX arrange meetings with LSE shareholders, according to the people, who asked not to be identified because the information is private. HKEX was already working with U.S. boutique investment bank Moelis & Co. on the $37 billion bid.LSE last week rejected HKEX’s takeover offer, citing problems in “strategy, deliverability, form of consideration and value.” HKEX said afterward LSE shareholders “should have the opportunity to analyze” the proposal in detail.Beyond the political, regulatory and commercial hurdles, HKEX is also demanding LSE walk away from its own $27 billion deal for data provider Refinitiv. HKEX has quietly begun its campaign on the ground, citing analysts’ criticism of the proposed Refinitiv acquisition, Bloomberg News has reported. An Aug. 13 Commerzbank AG research report pointed to sluggish growth at Refinitiv and said a substantial part of its revenue base is in “structural decline.”To contact the reporters on this story: Jan-Henrik Förster in London at email@example.com;Viren Vaghela in London at firstname.lastname@example.orgTo contact the editors responsible for this story: Dinesh Nair at email@example.com, ;Ambereen Choudhury at firstname.lastname@example.org, Ben Scent, Matthew MonksFor more articles like this, please visit us at bloomberg.com©2019 Bloomberg L.P.
(Bloomberg Opinion) -- Hong Kong’s IPO market is unexpectedly coming back to life. It may be a brief revival.Companies from Anheuser-Busch InBev SA’s Asian unit to Megvii Technology Ltd. aim to raise more than $10 billion selling shares before the year is out. It’s a turnaround that appeared improbable as recently as mid-August, when the Hang Seng Index erased its gain for the year amid anti-government protests and concerns over weakening global growth.Hong Kong’s benchmark stocks gauge has bounced 8% since Aug. 13, among the best-performing indexes worldwide in that period, as traders bet that China’s government will try to buoy investor spirits in the run-up to Oct. 1, when the country celebrates the 70th anniversary of the founding of the People’s Republic. That’s created a window of opportunity for companies that previously struggled to generate enough investor interest.Budweiser Brewing Company APAC Ltd. is the prime example. The unit of AB InBev, the world’s largest brewer, pulled what would have been the world’s biggest initial public offering in mid-July after failing to draw sufficient demand for the $9.8 billion sale. The company is back with a pared-down $5 billion offering and aims to list by the end of September, Carol Zhong, Julia Fioretti, Jinshan Hong and Crystal Tse of Bloomberg News reported last week, citing people familiar with the matter.The brewer is seeking to list minus its Australian operations, which the company agreed to sell to Asahi Group Holdings Ltd. for $11.3 billion soon after withdrawing its IPO in July. That hived off a slower-growing part of its operations, which may help attract investors who balked at Budweiser Brewing’s valuation last time around.Other than a rising stock market, a simple technical reason may account for the brewer’s haste to try again. A company that seeks to list within six months of its first application doesn’t need to prepare a new set of accounts, meaning Budweiser Brewing can just strip the Australian operations from its financials when pitching to investors this time around.Others lining up at the IPO well include Megvii, a Beijing-based artificial intelligence startup that’s seeking $1 billion; consumer lender Home Credit NV, which is targeting as much as $1.5 billion; Chinese sportswear retailer Topsports International Holdings Ltd., which aims to raise about $1 billion; and ESR Cayman Ltd., a logistics real estate developer backed by Warburg Pincus that earlier shelved a $1.2 billion deal. The first to list of the current crop may be biotechnology firm Shanghai Henlius Biotech Inc., which has already started taking orders for a $477 million sale.The biggest flotation of all may come in October, when New York-traded Alibaba Group Holding Ltd. will seek to raise as much as $15 billion in a secondary listing, Reuters reported last month.The resurgence in the IPO market is a tonic for Hong Kong Exchanges & Clearing Ltd., which has faced skepticism over its $36.6 billion bid for London Stock Exchange Group Plc and whose shares have dropped 16% from this year’s high. Hong Kong has slipped in the pecking order of global stock exchanges after topping the rankings in 2018. Companies raised $10.8 billion in IPOs this year through Sept. 13, less than half of the total in the same period last year.The question is whether there will be enough investor demand to soak up all the stock that an eager and growing group of listing candidates is waiting to thrust on buyers. Meanwhile, Hong Kong’s economy is deteriorating and the protests haven’t gone away. Companies must also consider whether China’s feelgood efforts will extend beyond Oct. 1.Time may be of the essence for this crowd. To contact the author of this story: Nisha Gopalan at email@example.comTo contact the editor responsible for this story: Matthew Brooker at firstname.lastname@example.orgThis column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.Nisha Gopalan is a Bloomberg Opinion columnist covering deals and banking. She previously worked for the Wall Street Journal and Dow Jones as an editor and a reporter.For more articles like this, please visit us at bloomberg.com/opinion©2019 Bloomberg L.P.
Hong Kong Exchanges and Clearing is embarking on a three-week charm offensive with London Stock Exchange investors as the Asian trading house tries to salvage its proposed $39 billion takeover offer. LSE's board is refusing to engage with HKEX after emphatically rejecting its approach on Friday. The LSE described HKEX's offer as fundamentally flawed, saying it would not meet its strategic objectives and came with a high risk of being blocked by regulators.