Proposal to LSE board will only proceed if deal for Refinitiv is terminated or voted down

The Hong Kong stock exchange has made a surprise £32bn bid to take over the 300-year old London Stock Exchange (LSE).

The bid was tabled by Hong Kong Exchanges and Clearing (HKEX), which said it would create an 18-hour trading day and was a vote of confidence in London as a financial centre, regardless of Brexit. It described the potential tie-up as a “corporate Romeo and Juliet”.

The bid comes weeks after the LSE Group unveiled its own global expansion plan with a $27bn (£22bn) deal to take control of Refinitiv, a financial data business that supplies information screens used on bank trading floors worldwide.

The LSE agreed that deal in an attempt to become a UK-headquartered global rival to the billionaire Michael Bloomberg’s financial news and data business. HKEX, whose largest shareholder is the Hong Kong government, is hoping to derail that deal and take control of the London Stock Exchange.

Charles Li, HKEX’S chief executive, said: “This is not a hostile transaction but it is also clearly not a typical transaction. We know we are late. It is almost a corporate Romeo and Juliet. We have been wanting to do this for a long time and now they are engaged with another person.”

The proposed deal is the latest in a series of UK firms targeted by overseas investors. Last month, Hong Kong’s richest family, led by the billionaire Li Ka-shing, bought the 220-year-old pub and beer company Greene King for £2.7bn. The Dorset-based defence group Cobham is the target of a £4bn bid from US private equity investors, while the holiday group Thomas Cook is being rescued by Chinese conglomerate Fosun International.

Chinese companies have made 15 big acquisitions in the UK so far this year, spending £6.75bn – already more than the $6bn spent on 23 deals last year. Many analysts point to the decline in the pound since the EU referendum for making UK companies look more attractive to overseas buyers.

Li said the Hong Kong exchange was not a Chinese company and pointed to the fact that seven years ago HKEX had bought the London Metal Exchange, the centre for global metals trading, in a deal that transformed the group into a global player.

He said: “We bought LME seven years ago and at that time a lot of criticism went around saying it was a potential Chinese takeover. We have invested heavily in the UK, created many jobs, paid a lot of taxes and we don’t have Chinese management at LME, you can see that walking around the floor. It is a quintessential British institution. This market is not known for being narrow-minded. We are not a Chinese company – we are a global company.”

HKEX said a takeover of the LSE would “reinforce Hong Kong’s position as the key connection between mainland China, Asia and the rest of the world”.

“Together we will connect east and west,” said Li. “We would have an 18-hour trading day emerge.” He described the proposal as a vote of confidence in London as the UK faces leaving the European Union.

“The UK is a global financial centre and the city of London is always going to be strong even post-Europe,” he said. “Any temporary geographical and political issues do not deter us from what is the right thing to do for both markets.”

Shares in the LSE initially jumped 16% but later fell back to £71.62, a rise of just over 5%, as investors expressed doubt about whether the Hong Kong proposal would be successful.

Since 2000 the LSE has been the target of seven proposed takeovers or mergers, and all have failed. The last was in 2017, when a £21bn merger with German rival Deutsche Börse was blocked by the European commission.

Richard Hunter, the head of markets at Interactive Investor, said: “The LSE has historically fought off approaches from overseas. The fact that the LSE share price has already retreated from the initial spike on release of the news may reflect some initial scepticism around the likelihood of the deal going through.”

The LSE said it would consider HKEX’s cash and shares offer, which it described as “unsolicited, preliminary and highly conditional”. It said the LSE’s directors would “make a further announcement in due course”.

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The company also said it would press on with its deal to buy Refinitiv.

If the deal with Refinitiv falls through, the LSE has agreed to pay a break fee of £198m. Refinitiv is owned by the US private equity group Blackstone and Thomson Reuters, which owns the Reuters news service.

The LSE, formally established in 1773 by a group of stockbrokers who had been trading in City of London coffee houses dating back to the 1570s, has grown into one of the world’s biggest stock exchanges. It survived being bombed during the second world war and an IRA attack that destroyed its public viewing area in 1990.