Hong Kong Exchanges and Clearing (HKEX) made the announcement weeks after the London Stock Exchange Group (LSEG) rejected its advances on several fronts.
The deal on offer would have priced the LSEG at £29.6bn but was conditional on the group scrapping its plan to buy financial data provider Refinitiv for £21.6bn.
LSEG’s board described the proposal as fundamentally flawed
LSEG said on 13 September the possible offer fell “substantially short of an appropriate valuation” and it saw “no merit” in holding talks.
Its concerns also included the Hong Kong exchange’s ties to the government of the Chinese territory, giving the mainland’s ruling Communist Party influence over its operations.
China’s influence in Hong Kong continues to be the focus of pro-democracy protests – with the demonstrations and a crackdown on its participants being blamed for disrupting business and hurting market values.
HKEX had argued a deal would have helped preserve London’s hub status from any Brexit hit and give its investors greater access to Asian markets.
It said in a statement on Tuesday: “The board of HKEX continues to believe that a combination of LSEG and HKEX is strategically compelling and would create a world-leading market infrastructure group.
“Despite engagement with a broad set of regulators and extensive shareholder engagement, the board of HKEX is disappointed that it has been unable to engage with the management of LSEG in realising this vision, and as a consequence has decided it is not in the best interests of HKEX shareholders to pursue this proposal.”
LSEG was yet to give a response to the statement but its shares fell 6% in early deals.
Neil Wilson, chief markets analyst at Markets.com, said of the announcement: “A concerted charm offensive failed to pay off for the Hong Kong group as investors balked at the anti-trust, regulatory and deliverability issues that the tie up implied.
“And, not least, LSE is fully committed to the Refinitiv deal.
“Finally, the premium on offer, though chunky, was not enough to compensate shareholders. There was never a cash element, just new shares in a HK-listed group.
“As we said at the time, this deal was a non-starter for a range of reasons, any one of which would have been enough to block a merger.”
