Hong Kong Exchanges & Clearing Ltd. made an unexpected £32bn bid for London Stock Exchange Group Plc, in a move that threatens to upend the UK bourse's combination with Refinitiv.
The operator of the Hong Kong exchange stunned investors with its proposal, which values LSE shares at £83.61 and is designed at "bringing together the largest and most significant financial centres in Asia and Europe", it said in a statement on Wednesday.
It comes weeks after the LSE agreed a £22bn all-share deal to take control of Refinitiv, a move the company said would transform it into a UK-headquartered, global rival to Michael Bloomberg's financial news and data business.
We are not a Chinese company. We are not even a Hong Kong-only company. We are a global company"
If the deal with Refinitiv falls through LSE will have to pay a break fee of £198m. Refinitiv is owned by a consortium led by Blackstone and including Thomson Reuters, which owns the Reuters news service.
The HKEX said the deal would be funded by a combination of existing cash and a new credit facility. It cautioned, however, that its statement to the market should be considered as an announcement to make a possible offer and is not confirmation of a firm intention to bid.
The LSE said it would consider HKEX's approach, noting it was "unsolicited, preliminary and highly conditional." HKEX, which counts the Hong Kong government as its largest shareholder, is offering £20.45 in cash and 2.495 newly issued HKEX shares for each LSE share.
Charles Li, the chief executive of HKEX, played down any tension surrounding a Chinese firm taking control of a strategic UK brand with access to sensitive market information.
"We are not a Chinese company. We are not even a Hong Kong-only company. We are a global company," he said.
The move comes at a time of political turmoil in both Hong Kong and London and is aimed at creating a global trading power better able to compete with US rivals such as ICE and CME.
UBS said that recent protests in Hong Kong could also act as a brake on any deal.
HKEX is already the owner and operator of the London Metal Exchange, the world's largest market in options and futures contracts on base and other metals. It bought the LME in 2012 for £1.4bn.