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The acquisition would create the world's third largest exchange group behind the New York Stock Exchange and Nasdaq in terms of the value of companies listed on these markets, according to operator data.
"The government is very unlikely to be scrutinized, and there will be a lot of concern about Chinese holdings," said John Colley, Professor of Strategy and International Business at Warwick Business School. "It may be thought that the British government will view this as an inadequate owner of such an important element of the financial community in London."
The Hong Kong government directly appoints half of the HKEX board, according to its website. And the appointment of the president must be approved by the Hong Kong Executive Director, Carrie Lam.
"The London Stock Exchange is an extremely important part of the UK financial system, so as you can imagine, the government and regulators will look closely at the details," said a spokesman for the UK government. Wednesday.
It is not only British regulators that could be concerned. London Clearing House, which is owned by LSE, is responsible for clearing almost all interest rate swaps in the United States. It is co-regulated by the Bank of England and the US Commodity Futures Trading Commission, Xavier Rolet, former CEO of the LSE, told the BBC on Thursday.
"I would expect US regulators to be interested," he said.
Fitch Ratings said that US and UK regulators may be concerned about data and information security given the "growing control exercised by the Chinese authorities over Hong Kong".
The LSE has other options
"The shareholders of LSE are reasonably convinced by the Refinitiv agreement and so might not want to change course for this proposed deal," Colley said.
This agreement, announced last month alone, aims to turn the London Stock Exchange into a global information and competition market, able to compete with the empire of Michael Bloomberg's financial data. Investors welcomed the deal, sending shares in the LSE up 27% since its announcement.
In its first public comment on the Hong Kong offer, the LSE reaffirmed its commitment to the Refinitiv transaction. And its shareholders do not seem convinced by the surprise offer. The LSE shares were trading 16% below the offer price on Thursday.
HKEX's stock and share purchase offers value the LSE at £ 29.6 billion ($ 36.4 billion), with cash accounting for less than half of the total. Shareholders would end up with a substantial number of shares of "uncertain future value," Colley said in an email.
Some analysts have said that this combination could be strategic.
The deal would give the LSE a significant stake in Asia, where the growth of financial assets is goingl Manish Singh, chief investment officer at Crossbridge Capital, told CNN Business.
London is already the main offshore trading center of the Chinese currency outside of Asia and wishes to maintain this position.
Could another bidder emerge?
The LSE has received a takeover approach every two and a half years on average since its IPO in 2000, according to Chris Turner, an analyst at Berenberg. In most cases, transactions have been blocked by shareholders or regulators, according to Dealogic data.
But if a new bidding war broke out, Intercontinental Exchange (ICE), owner of the New York Stock Exchange, was "the most natural acquirer" among US stock exchanges for LSE assets, said Kyle Voigt, analyst at Keefe, Bruyette & Woods in New York.
ICE launched an offer to buy on the LSE in 2016, following discussions on the merger between the LSE and the German Deutsche Borse.
A new ICE offer at a price higher than the Hong Kong offer would result in a dilution of profits for ICE, even taking into account the savings achieved. "That would make it difficult," Voigt said.
Rolet, the former CEO of LSE, said the consolidation of global trade was likely to continue.
"I would expect the strategy departments of the major US markets to spend sleepless nights in the coming weeks," he said.
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