BEIJING – Hong Kong’s stock exchange withdrew on Tuesday its bid to acquire its London rival less than a month after making an offer of $36.6 billion that would have united two of the world’s key trading hubs.
In a statement, the board of Hong Kong Exchanges and Clearing Ltd said it was unable to move on with a takeover of the London Stock Exchange Group PLC without any input from LSEG’s management after the latter’s board rejected the initial bid, saying it fell “substantially short.”
“Now it is not in the best interests of HKEX shareholders to pursue this proposal,” read the HKEX board’s statement, adding that it still believed a merger was “strategically compelling and would create a world-leading market infrastructure group.”
“The board of HKEX is disappointed that it has been unable to engage with the management of LSEG in realizing this vision,” it said.
The deadline for a new takeover proposal with a firm bid is Wednesday.
According to United Kingdom acquisition regulations, HKEX is barred from making any new approaches for the next six months.
HKEX made its surprising initial bid on Sept. 11, offering 8.36 pounds sterling ($10.27) per share of the LSE.
The British capital’s stock exchange turned down the proposal two days later, as the LSEG’s board considered it was “inherently uncertain” because of the ongoing political turmoil in the former colony, which called Hong Kong’s future as a financial gateway to mainland China into question.
The board added it saw “no merit in further engagement” given the offer’s “fundamental flaws.”
“The board has fundamental concerns about the key aspects of the conditional proposal: strategy, deliverability, form of consideration and value,” it said.
The merger between two of the largest exchanges in Europe and Asia could have created a huge stock market operator capable of competing with the New York Stock Exchange, by far the world’s biggest bourse.
Hong Kong is reeling from months of protests over concerns about China’s encroachment on the semi-autonomous city; over the weekend, the government invoked emergency powers for the first time in half a century in an attempt to quell the unrest.
Meanwhile, the UK still finds itself negotiating a messy divorce from the European Union.
Shares of HKEX rose 2.6 percent in Tuesday midday trading in Asia. The stock had dropped 8.2 percent from when the proposal was first made public through its last close.
The London Stock Exchange has been involved in a string of attempted mergers and takeovers over the past two decades, none of which have been successful.