The Hong Kong Exchanges and Clearing (HKEX) has made a proposal to the board of London Stock Exchange (LSE) to acquire and merge the two companies.
In HKEX's bid for the stock exchange, it has valued the LSE at £31.6bn with a share price of £83.61, implying a premium of 22.9%.
At Tuesday’s close, LSE’s share price was £68.04 but has jumped to £79 Wednesday morning following the announcement. ETF issuer Lyxor's rumours of a takeover had negative impact on the company which suffered significant outflows in 2019.
HKEX hopes the merger of the two companies will create a global market infrastructure leader.
The proposed transaction is subject to the LSE withdrawing its £22bn acquisition of data group Refinitiv.
Laura Cha, chairman of HKEX, said in a statement: “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.”
HKEX intends to apply for a secondary listing of its shares on the LSE one the proposed transaction is completed.
Graham Spooner, investment research analyst at The Share Centre, commented: “Shares are up 9% on the news with investors offered 2,045 pence in cash along with 2.495 in HK Exchange shares.
"The LSE’s share price has been strong year to date and there have been thoughts the group could be a target again especially following the proposed merger with Deutsche Boerse which fell through in 2017.”