Fears of ‘security implications’ from Communist Chinese influence as Hong Kong firm makes £31.6bn takeover bid for London Stock Exchange
- A tie-up with London could create a new behemoth straddling the East and West
- Shares in LSE Group surged 10 per cent after the approach was revealed
- The Hong Kong firm also purchased the London Metal Exchange back in 2012
A Hong Kong rival has mounted an audacious £32 billion takeover bid for the London Stock Exchange – sparking fears it could fall under Communist Chinese influence.
The Hong Kong Stock Exchange said a tie-up with London would create a new behemoth which straddles markets in the East and West.
But critics warned that it would hand control of one of Britain’s most important financial institutions to a foreign power. About 6 per cent of the Hong Kong exchange is owned by the city’s government, which would get a 3.5 per cent shareholding in the combined firm if the deal goes ahead.
The Hong Kong firm already owns another major City trading house, the London Metal Exchange, which it bought in 2012.
The Hong Kong Stock Exchange (pictured above) said a tie-up with London would create a new behemoth
It follows months of protests by pro-democracy campaigners in Hong Kong concerned about the power of Communist authorities in mainland China. Tory MP Tom Tugendhat, chairman of the foreign affairs select committee, said: ‘The Government must closely scrutinise this deal. It will only work if Hong Kong has the rule of law, and what we are seeing at the moment is really challenging that assumption.
‘For the UK, this is hugely important because our stock market isn’t just a trading hub, it’s a massive national asset.
‘Anything which jeopardises that would be an enormous concern.’
London Stock Exchange Group described the approach as ‘unsolicited, preliminary and highly conditional.’
London Stock Exchange bosses are expected to try to fight off the bid. The stock exchange handles about £472 billion of trades every day and hosts almost all of Britain’s publicly owned companies, including the members of the FTSE 100 index which are a mainstay of millions of pensioners’ retirement pots.
Although Hong Kong is meant to be run under a separate, more Westernised system than the authoritarian regime which rules mainland China, the former British colony’s freedom is believed to be increasingly under threat.
The city’s leader is not directly elected and must have the blessing of Beijing to rule.
Neil Wilson, of trading website Markets.com, said: ‘Political considerations will be front and centre. The UK Government may not wish to see such a vital symbol of UK financial services strength, and indeed a strategic asset, be owned by foreigners.
‘Effectively it would hand it over to the Chinese through the Hong Kong back door.’
The deal would see London Stock Exchange shareholders get £7.2 billion in cash and a 41 per cent stake in the merged business. Hong Kong shareholders would control the remaining 59 per cent.
London operations would remain unchanged, but the combined firm’s corporate headquarters would be in Hong Kong.