London (Flash Business)The London Stock Exchange has roundly rejected Hong Kong's $37 billion takeover bid, saying it was too low, politically risky and lacked strategic merit.
In a strongly worded statement Friday, LSE's board said it "unanimously" rejects this week's conditional proposal from Hong Kong Exchanges and Clearing (HKEX).
LSE(LNSTY) added that it sees "no merit in further engagement" because of the offer's "fundamental flaws." The London exchange said it remained committed to its acquisition of financial data provider Refinitiv.
Analysts had widely expected the HKEX bid to fail, given worries about Chinese influence over vital financial infrastructure and concerns about reduced competition.
HKEX responded in a statement that said it "continues to believe that the proposed combination ... represents a highly compelling strategic opportunity."
The Hong Kong company suggested that it could now make a hostile bid that would allow investors in LSE to choose between an improved offer and the planned purchase of Refinitiv.
"HKEX believes that shareholders in LSE should have the opportunity to analyze in detail both transactions and will continue to engage with them," the statement said.
Analysts at Citi said in a research note that they expect a second offer from HKEX that includes more cash and improved terms. But they warned that regulatory hurdles still threaten any deal.
LSE chairman Don Robert said the exchange was "surprised and disappointed" that HKEX(HKXCF) published its "unsolicited proposal within two days of our receiving it."
The unexpected bid was published Wednesday, suggesting that LSE received the offer on Monday.
The transaction posed serious risks and lacked value for shareholders, Robert said in a letter addressed to the chairperson and CEO of HKEX.
HKEX's relationship with the Hong Kong government would "complicate matters," making it "highly uncertain" that necessary approvals would be obtained, Robert said.