Bidder says it has been ‘unable to engage’ with the LSE management on the deal

The Hong Kong stock exchange has abandoned its £32bn takeover offer for the London Stock Exchange after being “unable to engage” with management on the deal.

The announcement by Hong Kong Exchanges and Clearing (HKEX) came nearly four weeks after the London bourse firmly rejected the cash-and-shares bid as a “significant backward step” with “fundamental flaws,” and said it saw “no merit” in holding talks with its Hong Kong rival.

Shares in the LSE fell more than 6% to £69.94, about the level where they were before HKEX made its approach for the prized 321-year-old City institution.

The takeover would have derailed the London bourse’s own $27bn (£22bn) deal to buy financial data provider Refinitiv. The move will turn it into a global rival to Michael Bloomberg’s financial news and data business.

HKEX, whose biggest shareholder is the Hong Kong government, said in a statement it still believed joining forces with the LSE was “strategically compelling and would create a world-leading market infrastructure group”.

It added, however: “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 LSE in realising this vision, and as a consequence has decided it is not in the best interests of HKEX shareholders to pursue this proposal.”

In a brief statement, the LSE noted HKEX’s announcement, and said it was making good progress on the planned Refinitiv purchase. It is seeking approval from regulators and will hold a shareholder meeting in November. It still hopes to complete the deal in the second half of 2020.

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The LSE’s chairman, Don Robert, had expressed concerns about HKEX’s ties with the Hong Kong government, which meant any deal would be difficult to agree. Almost half of HKEX’S board is appointed by the Hong Kong government, which has faced pro-democracy protests in recent months that have turned increasingly violent on both sides.

HKEX had argued that a deal would bring together the largest financial centres in Asia and Europe and give the LSE’s investors greater access to Asian markets, as the renminbi emerges as a global reserve currency.

HKEX already owns the London Metal Exchange, which it purchased in 2012 for £1.4bn, but has so far failed to turn it into a bridge between the west and China.