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H/T to @benjaminbland. London Stock Exchange’s response to HKEX is blunt, with a number of uncomfortable truths for HK.
“We [London] were very surprised and disappointed that you [HK] decided to publish your unsolicited proposal within two days of our receiving it.”
“We recognise the scale of the opportunity in China and value greatly our relationships there. However, we do not believe HKEX provides us with the best long-term positioning in Asia or the best listing / trading platform for China. “
“We value our mutually beneficial partnership with the Shanghai Stock Exchange which is our preferred and direct channel to access the many opportunities with China.” — [OUCH]
“Your proposal would be subject to full scrutiny from a number of financial regulators, as well as governmental entities under, for example, the UK Enterprise Act, the CFIUS process in the US, and the ‘golden powers’ regime in Italy....”
“There is no doubt that your unusual Board structure and your relationship with the Hong Kong government will complicate matters.” — [Rare public assertion of the stigma of association with HK/PRC gov’t. Fundamental difference in the concept of gov/market relationship exposed.]
“...there is such uncertainty, given the regulatory, shareholder and other approvals you require, that a sale to you would be concluded.” — [“and OTHER approvals...” sounds like Carrie Lam facing the media. Beijing is the not so invisible hand in the market.]
[London Stock Exchange’s letter gets worse.]
“We note that three-quarters of your proposed consideration is in HKEX shares, representing a fundamentally different and much less attractive investment proposition to our shareholders. We see the value of your share consideration as inherently uncertain.” - [OUCH again]
[The kick in the teeth:] “The ongoing situation in Hong Kong adds to this uncertainty. Furthermore, we question the sustainability of HKEX’s position as a strategic gateway in the longer term.” — [@Jkylebass is smiling.]
[And another thing!] “The Hong Kong concentration and core characteristics of your business, together with your Hong Kong domicile and listing, present an additional set of difficulties.” — [translation: you’ll be under water before sea levels rise.]
“Irrespective of the considerations above, and even assuming your proposal were deliverable, its value falls substantially short of an appropriate valuation for a takeover of LSEG, especially when compared to the significant value we expect to create...”
[The final sentence:] “Taking all of these factors into account, the Board unanimously rejects your proposal. Given the fundamental flaws in your proposal, we see no merit in further engagement.” — [Good day, sir.]
In this thread, my comments are all in brackets. London SE’s letter to HKEX are in quotes.
Gilded Age correspondence between Rockefeller, Vanderbilt, Carnegie and Morgan contained great zingers and polite put downs when the rivalries got heated. But the London Stock Exchange’s letter to HKEX is one for the history books, marking the end of Hong Kong’s era.
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