Hong Kong Exchanges and Clearing (HKEX) said it wants to merge the two huge bourses to create a “global powerhouse” linking the West with the fast-growing economies of Asia, particularly China.
If the deal goes ahead, it would create the second-biggest stock market group in the world after the New York Stock Exchange.
HKEX, which operates the stock market and futures market in the former British colony, is believed to have made an initial approach to the London Stock Exchange Group (LSEG) on Monday, and decided to go public with its proposal this morning. The announcement sent shares in the LSE soaring 456p, or 6.7 per cent, to 7260p.
Laura Cha, chairman of HKEX, said: “We believe a combination of HKEX and LSEG 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.
“Following early engagement with LSEG, we look forward to working with its board to demonstrate that this transaction is in the best interests of stakeholders, investors and both businesses.”
It comes weeks after the London Stock Exchange revealed its plans to acquire data business Refinitiv from Thomson Reuters and private equity firm Blackstone in a £22 billion deal to create a British-based rival to financial information group Bloomberg. The proposed Hong Kong merger is conditional on LSEG scrapping the Refinitiv takeover.
Business Secretary Andrea Leadsom, who was appearing on Bloomberg TV as the news of the HKEX proposal broke, said that while Britain welcomes foreign investment, the Government would “look very carefully at anything that had security implications for the UK”.
HKEX bought the London Metal Exchange in 2012 for £1.4 billion. LSEG said it “notes the...unsolicited, preliminary and highly conditional proposal. LSEG remains committed to, and continues to make progress on, its proposed acquisition of Refinitiv Holdings Ltd as announced on 1 August, 2019.”
The London Stock Exchange, which dates back to the 16th century, has seen off or abandoned a number of plans to merge with other markets over the years.
In 2000 it announced plans to merge with the Deutsche Börse but these fell through. In 2006, it rejected an unsolicited approach from the US tech market NASDAQ valuing it at £2.4 billion. In 2011, LSEG agreed to merge with the TMX Group, the owners of the Toronto Stock Exchange, but this plan was also abandoned. LSEG merged with Italy’s Borsa Italiana in 2007.