Hong Kong exchange falls over 3% after $39 bln takeover bid for LSE


Hong Kong Exchanges and Clearing Ltd (HKEX) shares fell more than 3% on Thursday after the bourse unveiled a $39 billion takeover approach to the London Stock Exchange Plc (LSE) on Wednesday.

Shares drop 3.7% in early deals in positive Hong Kong market

Deal contingent on LSE exchange abandoning Refinitiv acquisition

Adds detail details, update share price

HONG KONG, Sept 12 (Reuters) - Hong Kong Exchanges and Clearing Ltd (HKEX) 0388.HK shares fell more than 3% on Thursday after the bourse unveiled a $39 billion takeover approach to the London Stock Exchange Plc (LSE) LSE.L on Wednesday.

HKEX shares fell as much as 3.7% in opening deals, while the benchmark Hang Seng Index .HSI was up 0.1%, suggesting investors are concerned about the financial merits of the deal.

The proposed deal is aimed at creating a combined group better able to compete with U.S. rivals such as Intercontinental Exchange Inc ICE.N and CME Group inc CME.O. It is contingent on LSE abandoning a deal to acquire financial information provider Refinitiv.

HKEX, whose main shareholder is the Hong Kong government, said its 31.6 billion pound ($38.97 billion) cash-and-share transaction proposal represented a 22.9% premium to the LSE's closing stock price on Tuesday of 8,361 pence.

The Hong Kong exchange's bid is considered a bet that a major international acquisition would help it overcome uncertainty at home.

Political unrest in Hong Kong is entering its fourth month, with protests becoming increasingly violent over that time - raising questions among companies and investors about the appeal of the city's bourse.

Analysts say Hong Kong's status as part of China could make it hard to win approval for the deal from British politicians and European regulators.

"The transaction will require various regulatory approvals, which will stress-test the world's understanding of Hong Kong's 'one country, two systems' constitution," said David Blennerhassett, an independent analyst writing on the SmartKarma research platform.

"It will be politically tough now and in the near-term to get this through various regulatory channels," he added.

($1 = 0.8110 pounds)

(Reporting by Jennifer Hughes and Sumeet Chatterjee; additional reporting by Donny Kwok; Editing by Kim Coghill and Stephen Coates)

((donny.kwok@thomsonreuters.com; +852 2843 6470; Reuters Messaging: donny.kwok.reuters.com@reuters.net))

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