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HKEX to finance LSE bid with cash and new credit facilities

By Tessa Walsh
The name of Hong Kong Exchanges and Clearing Limited is displayed at the entrance in Hong Kong

By Tessa Walsh

LONDON (LPC) - Hong Kong Exchanges and Clearing will finance its unsolicited £31.6bn cash-and-share takeover bid for the London Stock Exchange with a combination of cash and new credit facilities, according to its announcement on Wednesday.

The proposed acquisition would be done via a scheme of arrangement and is conditional on the LSE terminating its acquisition of data company Refinitiv.

The LSE announced in August that it had agreed to buy Refinitiv in a US$27bn deal aimed at transforming the exchange into a market data and analytics giant.

HKEX is being advised exclusively by Moelis & Company on its bid for LSE, and last tapped the loan market in June 2012 to finance its £1.4bn purchase of the London Metals Exchange.

HKEX raised a £543m one-year bridge loan via Deutsche Bank, HSBC and UBS to fund the LME acquisition. That loan was priced at 65bp over Libor, with a step up to 85bp. China Development Bank also provided a US$1.8bn three-year bilateral loan.

LSE said it is committed to, and continues to make good progress on, its proposed acquisition of Refinitiv, which is being financed by a US$13.5bn bridge loan that has been underwritten by Barclays, Goldman Sachs and Morgan Stanley. Relationship banks were offered tickets of US$1bn each.

LSE expects its acquisition of Refinitiv to complete by the second half of 2020, and will have to pay Refinitiv a break fee of £198.3m if it decides not to proceed with the acquisition. HKEX has an initial bid deadline of October 9.

Refinitiv, the parent company of LPC and IFR, is majority owned by a consortium lead by US private equity firm Blackstone, which bought a 55% stake in Thomson Reuters’ Financial & Risk business in October 2018 for US$20bn in the largest leveraged buyout since the financial crisis. Thomson Reuters owns the remaining 45% stake.

The US$13.5bn bridge loan for investment-grade rated LSE was expected to refinance the US$13.5bn leveraged loan and high-yield bond financing that was put in place last year to finance Blackstone's acquisition of Refinitiv.

(Editing by Christopher Mangham)