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Why Hong Kong’s bid for London Stock Exchange was doomed from the start

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Charles Li
Hong Kong Exchanges and Clearing Limited (HKEx) Chief Executive Charles Li delivers a speech during the 17th Nikkei Global Management Forum titled "Resilient Leadership - Making the Next Leap Forward" in Tokyo on November 10, 2015. Li made a speech entitled "Connecting with China: The Opportunities and Challenges" at the business forum. AFP PHOTO / KAZUHIRO NOGI (Photo credit should read KAZUHIRO NOGI/AFP/Getty Images)

For the last month the chief executive of the Hong Kong bourse has been selling his £32bn takeover offer for the London Stock Exchange (LSE) as if it were the perfect love match.

“We complete each other,” Charles Li told banking delegates in Canary Wharf.

His amorous talk, however, has not been enough to convince the Square Mile that the deal was ever that tempting.

Read more: Hong Kong abandons bid for London Stock Exchange

“Some of us here think Charles wasn’t even that set on buying the LSE,” says the managing director of one rival stock exchange giant. “With the troubles in Hong Kong, [Li] just needed to show that they could still flex their muscle and make big offers”.

Perhaps that might be going a bit far. The Hong Kong Exchange and Clearing (HKEX) did seem truly keen on the deal, but the barriers it faced were simply too large.

Firstly, while Li believed he had to make his move before the LSE tied the knot with data provider Refinitiv, the simultaneous mass unrest in Hong Kong proved unfortunate timing and overshadowed the debate.

There was also the issue of regulation; with the blocking of a tie-up between Deutsche Borse and LSE two years ago still fresh in many minds, there was much scepticism over whether watchdogs would let this latest deal pass.

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LSE boss David Schwimmer also flagged another concern – that management ultimately viewed Shanghai, rather than Hong Kong, as the financial centre in China.

Finally, there was the issue of the rival Refinitiv deal. 

Schwimmer’s grand vision of establishing a financial data powerhouse still faces questions; Refinitiv has been trailing behind its rival Bloomberg and its underperformance has been enough to turn away suitors, including former LSE boss Xavier Rolet, in recent years.

But many top shareholders feel that the LSE’s own £22bn bid to buy Refinitiv is far more appealing than the HKEX offer nonetheless.

Perhaps, regardless of all these factors, the writing was always on the wall for HKEX: after all, Li first unveiled his blockbuster offer as “a corporate tale of Romeo and Juliet”. 

Before making the comparison, it seems he could have done with reading the final act.