[ N E W S
HKEX’s proposal was signifi-
cantly higher than that of Deutsche
Börse’s offer of £21 billion made
three years earlier in its ill-fated
“merger of equals”. The subse-
quent unfolding of the German
exchange operator’s move to
merge with LSEG was intense, and
the same can already be said for
HKEX’s attempt.
Detailing the logic behind the bid
for LSEG, HKEX chief execu-
tive, Charles Li, stated that the
mega-merger would “redefine
global capital markets for decades
to come”, adding that the “com-
bined group will be strongly placed
to benefit from the dynamic and
evolving macroeconomic land-
scape, whilst enhancing the long-
term resilience and relevance of
London and Hong Kong as global
financial centres.”
HKEX’s offer was made public
just a month after LSEG agreed
its own mega-deal with data and
trading services provider Refinitiv
for $27 billion. However, the Asian
bourse made it clear that the offer
was reliant on LSEG pulling out of
the deal which its chief executive,
David Schwimmer, had already de-
scribed as being ‘transformational’
for the exchange.
During one keynote interview in
London on 19 September, not long
after details of HKEX’s move were
revealed, Schwimmer outlined that
the Refinitiv deal had been driven
by continuing changes across the
industry, including the increasing
importance of data and analytics,
and the shift towards electronic
and multi-asset trading.
Refinitiv would also offer LSEG
a route into foreign exchange
markets, the largest traded asset
class globally, for the first time,
and broaden the exchange’s global
footprint in terms of coverage in
emerging and growth markets.
Currently, LSEG is comprised of
R E V I E W ]
"We don't take short-term perspectives.
We view Shanghai as the financial centre
in China."
DAVID SCHWIMMER, CEO, LSEG
various trading venues in equi-
ties, derivatives and fixed income,
the global FTSE Russell indices
business, as well as clearinghouse
giant LCH.
Just 48 hours after the HKEX
bid was announced, LSEG came
out fighting. The exchange group’s
board unanimously voted to reject
the proposed takeover, adding that
it saw no merit in further engage-
ment with HKEX. LSEG chairman,
Don Robert, penned a letter to
the Hong Kong exchange oper-
ator stating the board was “very
surprised and disappointed” that
HKEX had decided to publish its
unsolicited proposal just two days
after LSEG had received it. Shortly
after, HKEX said it would continue
to pursue the acquisition, but also
described itself as “disappointed”,
adding that LSEG had “declined to
properly engage” with the offer to
find a path to constructive dialogue
with the LSEG board.
On 24 September, Schwimmer
and Li crossed paths at the Sibos
conference in London. The LSEG
chief reiterated to delegates that
LSEG views Shanghai as the long-
term financial centre in China, not
Hong Kong. LSEG had already out-
lined in its rejection of the HKEX
bid that its efforts to build out the
exchange group’s position as the
gateway to China were focused on
Shanghai, following the launch of
a Stock Connect initiative in July
this year.
“I think if you look at the trans-
formation of China over the past
15 or 20 years, it has been extraor-
dinary,” Schwimmer said at Sibos.
“We view the capital controls
around the Chinese market as
constantly evolving, and the trend
is that they are slowly but surely
being removed. We see that as the
inevitable path and we’ve invested
in this through our relationships
with the Shanghai London Stock
Connect. We don’t take short-term
perspectives. We view Shanghai as
the financial centre in China.”
Following Schwimmer’s com-
ments, Li made the case for both
exchange groups to explore the
merger more seriously. He said
that as the world becomes more
polarised between the east and the
west, the world needs a markets
infrastructure that can underpin
both of those centres of gravity.
“The idea that China will relax its
capital control will continue to be
talked about for the next 20 years,”
Li said. “They are great planners
of economy and affairs, but have
challenges dealing with outsiders
because they don’t want to give
up their standards. [Schwimmer]
seems happy with the relationship
that LSEG has with Shanghai, but
that has only been in place since
June. Our idea with this transac-
tion is a simple vision, but a big
dream. We would create a global
infrastructure that is unrivalled
across asset classes, across curren-
cies and across time zones. Togeth-
er, we complete each other.”
At the time of publication, the
LSEG will continue its pursuit of
Refinitiv while HKEX continues its
pursuit of LSEG. If previous merg-
er attempts, failures and successes
are anything to go by, the story of
the what would be the merger of
the century is far from over.
Issue 61 // TheTradeNews.com // 21