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London’s LSE Formally Rejects Hong Kong Exchange’s Surprise $37 Billion Bid

Pedestrians pass a sign at the London Stock Exchange Group Plc headquarter offices in the City of London, U.K., on Wednesday, Sept. 11, 2019. Hong Kong Exchanges and Clearing Ltd. made an unexpected bid for LSE, which could potentially throw the European exchange's own transformative deal into jeopardy. Photographer: Chris J. Ratcliffe/Bloomberg via Getty ImagesPedestrians pass a sign at the London Stock Exchange Group Plc headquarter offices in the City of London, U.K., on Wednesday, Sept. 11, 2019. Hong Kong Exchanges and Clearing Ltd. made an unexpected bid for LSE, which could potentially throw the European exchange's own transformative deal into jeopardy. Photographer: Chris J. Ratcliffe/Bloomberg via Getty Images
Pedestrians pass a sign at the London Stock Exchange Group Plc headquarter offices in the City of London, U.K., on Wednesday, Sept. 11, 2019. Hong Kong Exchanges and Clearing Ltd. made an unexpected bid for LSE, which could potentially throw the European exchange's own transformative deal into jeopardy. Chris J. Ratcliffe—Bloomberg via Getty Images

London Stock Exchange Group Plc has formally 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 bourse, which is working on its own deal to buy data provider Refinitiv in a $27 billion transaction, said HKEX’s overture on Wednesday had problems in its “strategy, deliverability, form of consideration and value.”

“LSEG remains committed to and continues to make good progress on its proposed acquisition of Refinitiv,” the firm said in a statement Friday. HKEX has said 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.

LSE shares 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). However, the stock pared gains after analysts poured cold water on the deal and top investors raised doubts about its attractiveness compared to the Refinitiv acquisition.

The British government has the power to scrap the deal on public-interest grounds. On Wednesday it said LSE is a “critically important part of the U.K. financial system” and that it would be closely scrutinizing details of the 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 London Metal Exchange in 2012 for 1.4 billion pounds.

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