The scale of the deal is one which approximately results in the two exchanges being a merger of equals. The London Stock Exchange has historically fought off approaches from overseas, preferring instead to be the acquirer. It may also be that the likes of the New York Stock Exchange will be looking on with interest.
In addition, the very nature of the Hong Kong approach will be subject to any number of considerations, such as competitive and regulatory issues. This is quite apart from the political questions it raises, both in terms of the history between the two “countries”, as well as how an East-West tie-up might be seen in the eyes of the United States, given the current economic situation.
Part of the proposal requires that the Stock Exchange back away from its recent $27 billion deal to acquire Refinitiv, which appears to be an early stumbling block. The initial response from the Stock Exchange, which describes the approach as “unsolicited, preliminary and highly conditional”, is one which it will consider.
The proposal is a fascinating prospect, but far from a done deal. The fact that the LSE share price has already retreated from the initial 10% spike on release of the news may reflect some initial scepticism around the likelihood of the deal going through.”