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HKEX seeks loan of up to £8b to fund LSE bid

Hong Kong

HONG Kong Exchanges & Clearing Ltd (HKEX) is in talks with banks for a loan to back its proposed takeover bid for London Stock Exchange Group Plc, people familiar with the matter said.

The bourse has been discussing borrowing between £7 billion and £8 billion (S$11.9 billion and S$13.6 billin), according to the people, who asked not to be identified because the information is private. It is seeking to form a syndicate of several lenders, the people said.

Under UK takeover rules, HKEX must submit a formal offer by Oct 9 unless LSE grants an extension. Executives from the Hong Kong exchange were in London last week, meeting with LSE shareholders to convince them of the merits of the deal, which is known internally at HKEX as "Project Lima", according to the people.

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As part of its proposal, the Hong Kong bourse is demanding that LSE walk away from its own US$27 billion deal for data provider Refinitiv. A total of 18 banks signed a US$13.5 billion bridge loan last month for that acquisition.

Shares of HKEX rose as much as 2.3 per cent during Monday morning trading in Hong Kong, while the benchmark Hang Seng Index was little changed.

LSE rejected HKEX's £29.6 billion takeover proposal last month, citing complications ranging from Hong Kong's unrest to potential problems with regulators. HKEX is counter-attacking with a charm offensive, bringing in UBS Group AG and HSBC Holdings Plc to convince shareholders of the merits of its own proposal, Bloomberg reported last week.

In a note on Thursday, a Sandler O'Neill & Partners analyst said his firm hosted an investor meeting with HKEX chief executive officer Charles Li and co-president Romnesh Lamba. The executives emphasised the merits of combining an Asian exchange with a European counterpart, given little overlap in their respective capabilities, the note said.

HKEX is concerned that LSE will try to "run out the clock" before the Oct 9 deadline, given the target's lack of cooperation so far, the Sandler O'Neill note said.

Some of the Hong Kong firm's pitches to the UK company's investors have been met with ambivalence so far, the people familiar with the matter said, as some fund managers told HKEX that they like LSE's Refinitiv deal and HKEX's bid isn't high enough.

No final agreements have been reached, and details of the financing could still change, the people said. A representative for HKEX declined to comment. BLOOMBERG