London Stock ExchangeThe Hong Kong Exchanges and Clearing Ltd (HKEX) has offered to buy the London Stock Exchange Group Plc (LSE) for an enterprise value of £31.6 billion ($39 billion), it said in a statement on Wednesday.

HKEX believes the combination of the two bourses will create a “global market infrastructure leader” and the proposed combination would strengthen both the businesses and position them to innovate across geographies.

The deal, however, is contingent on the condition that LSE’s recent deal to acquire data company Refinitiv is either rejected or terminated.

In response to the HKEX’s offer, LSE said that it is committed to and is making good progress on its proposed acquisition of Refinitiv.

The LSE announced in August that it has agreed to buy Refinitiv in a $27 billion deal aimed at transforming the exchange into a market data and analytics giant.

Under the proposed deal, the shareholders of the London bourse will get 2,045 pence in cash and 2.495 newly issued HKEX shares for every LSE share they hold. The deal, which values the entire capital of LSE at about £29.6 billion, is at a premium of about 22.9% to the Sept.10 closing share price of 6,804 pence per LSE share, 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 in detail with the LSEG Board to demonstrate that this transaction is in the best interests of all stakeholders, investors and both businesses,” said Laura Cha, Chairman of HKEX.

The deal will enable the creation of extensive data sets for global investors, through the combination of LSE’s global data and analytics capabilities and distribution channels, and HKEX’s access to China.

Following the closing of the deal, the management of LSE is expected to continue to operate the businesses and to participate in HKEX Group management. HKEX also said that it intends to apply for a secondary listing on the LSE post the completion of the merger. The deal will be financed through a combination of cash resources and new credit facilities.

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by Krishna V Kurup
Senior Market Analyst at IBS Intelligence
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