Filed by Hong Kong Exchanges and Clearing Limited
Pursuant to Rule 425 under the Securities Act of 1933, as amended
Subject Company: London Stock Exchange Group plc
Important Disclaimer
Updated: 11 Sep 2019
Possible offer (the "Offer") by Hong Kong Exchanges and Clearing Limited (“HKEX”) for London Stock Exchange Group plc (“LSEG”)
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Additional U.S. information
The Offer relates to the securities of a UK company and is subject to UK procedural and disclosure requirements that are different from those of the United States. Any financial statements or other financial information included in this Microsite may have been prepared in accordance with non-US accounting standards that may not be comparable to the financial statements of US companies or companies whose financial statements are prepared in accordance with generally accepted accounting principles in the United States. It may be difficult for US holders of shares to enforce their rights and any claims they may have arising under the US federal securities laws in connection with the Offer, since HKEX and LSEG are located in a country other than the United States, and some or all of their officers and directors may be residents of countries other than the United States. US holders of shares may not be able to sue HKEX and LSEG or their respective officers or directors in a non-US court for violations of the US securities laws. Further, it may be difficult to compel HKEX and LSEG and their respective affiliates to subject themselves to the jurisdiction or judgment of a US court.
The Offer may be implemented under a scheme of arrangement provided for under English company law (a “Scheme”). A transaction effected by means of a Scheme is not subject to the tender offer rules under the US Securities Exchange Act, as amended (the “US Exchange Act”), and is exempt from the registration requirements of the US Securities Act of 1933, as amended (the “US Securities Act”). If the Offer is effected by way of a Scheme, any HKEX securities to be issued pursuant to the Offer would be issued in reliance upon the exemption from the registration requirements of the US Securities Act provided by Section 3(a)(10) thereof. In addition, securities issued pursuant to the Scheme will not be registered under any US state securities laws and may only be issued to persons resident in a state pursuant to an exemption from the registration requirements of the securities law of such state.
Alternatively, the Offer may be implemented by way of a takeover offer. If HKEX exercises its right to implement the Offer by way of a takeover offer, such offer will be made in compliance with all applicable US tender offer (including Rule 14E under the US Exchange Act) and securities laws and regulations, including exemptions provided under Rules 14d-1(c) or (d) under the US Exchange Act and exemptions from the registration requirements of the US Securities Act.
In accordance with normal UK practice and pursuant to Rule 14e-5(b) of the US Exchange Act, HKEX or its nominees, or its brokers (acting as agents), may from time to time make certain purchases of, or arrangements to purchase, LSEG shares outside of the US, other than pursuant to the Offer, until the date on which the Offer and/or Scheme becomes effective, lapses or is otherwise withdrawn. These purchases may occur either in the open market at prevailing prices or in private transactions at negotiated prices. Any information about such purchases will be disclosed as required in the UK, and will be reported to a Regulatory Information Service and will be available on the London Stock Exchange website at www.londonstockexchange.com.
Holders of LSEG securities are urged to read any documents related to the Offer filed, furnished or to be filed or furnished with the U.S. Securities and Exchange Commission (the "SEC"), if any, because they will contain important information regarding the Offer and any related offer of securities. Such documents will be available free of charge at the SEC's website at www.sec.gov. Nothing in this Microsite shall be deemed an acknowledgement that any SEC filing is required or that an offer requiring registration under the US Securities Act may ever occur in connection with the Offer.
Forward-Looking Statements
This part of the website and the Information contained in it may contain certain forward-looking statements with respect to the financial condition, results of operations and businesses of HKEX and the HKEX Group (being HKEX and its subsidiaries and subsidiary undertakings) and LSEG and the LSEG Group (being LSEG and its subsidiaries and subsidiary undertakings) following the implementation of the Offer.
All statements other than statements of historical fact are, or may be deemed to be, forward-looking statements. Forward-looking statements are statements of future expectations that are based on management's current expectations and assumptions and involve known and unknown risks and uncertainties that could cause actual results, performance or events to differ materially from those expressed or implied in these statements. Forward-looking statements include, among other things, statements concerning the potential exposure of HKEX and the HKEX Group to market risks and statements expressing management’s expectations, beliefs, estimates, forecasts, projections and assumptions, including as to future potential cost savings, synergies, earnings, cash flow, return on capital employed, production and prospects. These forward-looking statements are identified by their use of terms and phrases such as "anticipate", "believe", "could", "estimate", "expect", "goals", "intend", "may", "objectives", "outlook", "plan", "probably", "project", "risks", "seek", "should", "target", "will" and similar terms and phrases.
There are a number of factors that could affect the future operations of HKEX and the HKEX Group and could cause those results to differ materially from those expressed in the forward-looking statements included in this Microsite.
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Each forward-looking statement speaks only as at the specified date of the relevant document within which the statement is contained. Neither HKEX nor any member of the HKEX Group undertakes any obligation to publicly update or revise any forward-looking statement as a result of new information, future events or other information. In light of these risks, results could differ materially from those stated, implied or inferred from the forward-looking statements contained in this Microsite.
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HKEX INVESTOR PRESENTATION PROPOSED COMBINATION WITH LONDON STOCK EXCHANGE GROUP PLC (“LSEG”) 11 September 2019
Disclaimer NOT FOR RELEASE, PRESENTATION, PUBLICATION OR DISTRIBUTION IN WHOLE OR IN PART, DIRECTLY OR INDIRECTLY, IN, INTO OR FROM ANY JURISDICTION WHERE TO DO SO WOULD CONSTITUTE A VIOLATION OF THE RELEVANT LAWS OR REGULATIONS OF THAT JURISDICTIONThis presentation has been prepared by Hong Kong Exchanges and Clearing Limited (“HKEX”) in connection with the possible offer for London Stock Exchange Group plc (“LSEG”) by HKEX (the “Possible Offer”) and does not purport to contain all the information that may be necessary or desirable to fully and accurately evaluate HKEX, LSEG or the business prospects of the Possible Offer. By accepting these presentation slides, and attending the presentation, you agree to the conditions set out below. This presentation is not intended to, and does not, constitute or form any part of any offer, solicitation, invitation or recommendation to purchase, otherwise acquire, subscribe for, sell or otherwise dispose of, any securities whether pursuant to this presentation or otherwise. The statements contained in these presentation slides are not to be construed as legal, business, financial or tax advice.This presentation is not directed at, and is not intended for distribution to or use by, any person or entity in any jurisdiction or country where such distribution or use would be contrary to law or regulation or which would subject HKEX to any registration requirement within such jurisdiction or country. Shareholders who are in any doubt regarding such matters should consult an appropriate independent adviser in the relevant jurisdiction without delay. Any failure to comply with such restrictions may constitute a violation of the securities laws of any such jurisdiction.The statements contained in these presentation slides are made as at the date of this presentation, unless some other time is specified in relation to them, and delivery of this presentation shall not give rise to any implication that there has been no change in the facts set out in these presentation slides since such date. Unless expressly stated to the contrary in these presentation slides, no statement in the presentation slides is intended as a profit forecast or estimate for any period and no statement in these presentation slides should be interpreted to mean that earnings for HKEX or earnings per HKEX share, as appropriate, for the current or future financial years would necessarily match or exceed the historical published earnings for HKEX or per HKEX share.Statements in respect of the Possible Offer relate to future actions and circumstances which, by their nature, involve risks, uncertainties and contingencies. As a result, any targets, actions or outcomes referred to may not be achieved, may be achieved later or sooner than estimated, or those achieved could be materially different from those estimated. Except as expressly stated, nothing in this presentation constitutes a quantified financial benefits statement, profit forecast or profit estimate for the purposes of Rule 28 of the City Code on Takeovers and Mergers.None of HKEX, its shareholders, subsidiaries, affiliates, or its or their respective directors, officers, partners, employees, representatives and advisers (the “Relevant Parties”) makes any representation or warranty, express or implied, as to the accuracy or completeness of the information contained in this presentation, or otherwise made available, nor as to the reasonableness of any assumption contained herein or therein, and any liability therefor (including in respect of direct, indirect, consequential loss or damage) is expressly disclaimed. Nothing contained herein or therein is, or shall be relied upon as, a promise or representation, whether as to the past or the future and no reliance, in whole or in part, should be placed on the fairness, accuracy, completeness and correctness of the information contained herein or therein. None of the Relevant Parties undertakes any obligation to provide the recipient with access to any additional information or to update or correct any inaccuracies in or omissions from this presentation. The information set out in this presentation is provided on an “as is” and “as available” basis and may be amended or changed. It is not a substitute for professional advice which takes account of your specific circumstances and nothing in this document constitutes legal advice.The companies in which HKEX directly and indirectly owns investments are separate entities. In this presentation, “HKEX” is sometimes used for convenience where references are made to HKEX and its subsidiaries in general. Likewise, the words “we”, “us” and “our” are also used to refer to subsidiaries in general or to those who work for them. These expressions are also used where no useful purpose is served by identifying the particular company or companies. Similar references are made to “LSEG” with similar logical application.This presentation contains statements that are or may be forward-looking with respect to the current expectations, estimates, projections, beliefs and assumptions of HKEX about the businesses and the markets in which it and its subsidiaries operate or aspires to operate in. These statements can be identified by the use of forward-looking terminology such as “believe”, “anticipate”, “expect”, “prospect”, “estimated”, “should”, “may” or the negative thereof, or other variations thereof, or comparable terminology indicating expectations or beliefs concerning future events. These forward-looking statements are not guarantees of future performance and are subject to market risk, uncertainties and factors beyond the control of HKEX, including government policy, regulatory approval, the behaviour of market participants, competitive developments and, where relevant, the identification of and successful entry into agreements with potential business partners. As such, there is no guarantee that the initiatives described herein, including the Possible Offer, will be implemented, or that they will be implemented in the form and timeframe described herein. Therefore, actual outcomes and returns may differ materially from the assumptions made and the statements contained in this presentation.Each of the HKEX directors, whose names are set out on the “Board” page of the HKEX website at www.hkexgroup.com (the “HKEX Directors”), accepts responsibility for the information contained in this presentation. To the best of the HKEX Directors’ knowledge and belief (who have taken all reasonable care to ensure that such is the case), the information contained in this presentation is in accordance with the facts and, where appropriate, does not omit anything likely to affect the import of such information. Certain financial data has been rounded. As a result of this rounding, the totals of data presented in this presentation may vary slightly from the actual arithmetic totals of such data.2
3 Executive Summary The proposed combination with LSEG represents a highly compelling strategic opportunity to create a global market infrastructure leaderTwo of the world’s premier market infrastructure businesses, HKEX and LSEG would together offer unique potential to enhance and capture global capital and data flows. The proposed combination would:Create a world-leading market infrastructure group with a global footprint, connecting the established financial markets in the West and the emerging financial markets in the East, particularly ChinaReinforce Hong Kong’s position as the key gateway between the Mainland China and the rest of the world, providing a trusted and clear path for the continued opening up of the Mainland capital marketsEnhance global capital formation by facilitating access to equity capital across the world and through theConnect programmes, and offer innovative opportunities across asset classes with global relevanceThe two businesses are highly complementary, and a combination would offer prospects of significant synergies. HKEX is confident that this would be highly compelling for both HKEX and LSEG shareholders
4 Compelling Strategic Rationale Creation of a World Leading Market Infrastructure GroupWith global footprint, diversified across asset classes, connecting the established financial markets in the West with the emerging financial markets in the East, particularly China Gateway to Mainland ChinaReinforces HKEX’s role as the leading gateway between Mainland China’s capital markets and the rest of the world, significantly facilitating RMB internationalisation, providing a trusted and clear path for the continued expansion of two-way capital markets flows Creation of Unique and Valuable Data SetsThrough the combination of LSEG’s global data and analytics capabilities and distribution channels, and HKEX’s access to China Enhancement of Global Capital FormationBy making it easier for companies to access equity capital across the world, through the IPO and secondary fundraising markets in London, Hong Kong, Milan, and Mainland China via the Connect programmes Compelling Financial ProfileSignificant synergy potentialIntends to continue dividend policy with normal target-payout ratio of 90% of combined group profits 1 2 3 4 6 Strong Technology Base Offers Innovation OpportunitiesIn equities, fixed income, currencies, commodities and derivatives products with domestic, regional and global relevance and allows for the application of best-in-class technologies in multiple markets and platforms 5
5 HKEX Company Overview Overview of HKEX Source: (1)(2)(3) Company informationAs of 10 September 2019Ranked # 1 in IPO funds raised in 6 of the past 10 yearsSegment split based on FY2018. Since April 2019, the Clearing segment is renamed the Post Trade segment as part of the reorganisation to facilitate Strategic Plan execution (4) Net debt is zero when the amount of cash and cash equivalents of Corporate Funds (excluding those reserved for supporting Skin-in-the-Game and default fund credits of Clearing House Funds) is higher than total borrowings Third largest exchange group globally by market capitalisation – HK$308bn1Headquartered in Hong Kong with c.2,100 employees worldwide Offices in London, Singapore, Beijing, Shanghai and Shenzhen Operates 2 exchanges and 4 clearing houses inHong Kong Operates LME and LME Clear in the UK, world leader with the majority of base metals futures trading Multi-asset classes and fully vertically integrated Equities, FIC, CommoditiesTrading, clearing, settlement and custody Consistently the world’s largest IPO market2 with over 2,300 listed companies 24% 22% 9% 39% 4 % 2% Cash Equity andFinancial DerivativesCommodities Post Trade Technology Corporate Items RevenueHK$15.9bn Segment Revenue3 Zero Net Debt4 Key Financials (FY2018) HKEX Group HKEX has been connecting China with international capital markets for over 20 years EBITDAHK$11.8bnEBITDA Margin74%3-yr EBITDA CAGR24% SEHKStock Exchange of Hong Kong HKFEHKFutures Exchange LME LME Clear Cash Market(Equities, ETFs, Bonds) On-Exchange Derivatives (Futures and Options) OTCClearing HONG KONG UK Commodities Derivatives (Futures and Options) TRADING CLEARING HKSCCHong Kong Securities Clearing Company SEOCHOptions Clearing House HKCCHKFEClearing Corp OTCClear Shanghai Shenzhen BondStock Stock ConnectConnect Connect Pioneer in China capital markets connectivityCHINA CONNECTIVITY
6 LSEG Company Overview Note: Financials in non-HKD currencies are converted to HKD for illustrative purposes. Rate: £1=HK$9.6865 (at 10 September 2019)Source: Company information (A: annual and interim reports, B: investor relations materials, C: company website), D: BloombergSegment split based on FY18; segment breakdown excludes “other and eliminations” category (-£7m revenue for FY18)Post trade services includes both LCH and CC&G and Monte TitoliAs of 30 June 2019 (2019 Interim Report) Largest market infrastructure group in Europe by market capitalisationDHeadquartered in London with significant operations in North America, Italy, France and Sri LankaEmploys c.4,400 people in 18 countriesPost-trade services segment includes clearing, settlement and custody offered by LCH and Monte Titoli#1 OTC clearer worldwide with US$1,077tn clearedA,C>90% market share globally in interest rate swaps clearingCLeading global information services, capital markets and technology playerA,B,CLeading global index provider with c.US$16tn in benchmarked AUMA,BMulti-asset class coverage through FTSE Russell, the Yield Book and Mergent Offers primary and secondary capital market services through, London Stock Exchange, Borsa Italiana, MTS (fixed income market) and Turquoise (MTF)MillenniumIT is a leading global market infrastructure technology providerC Overview of LSEG Key Financials (FY2018)A LSEG BusinessesA Information Services FTSE Russell Indexes Real time dataOther information Post Trade – LCH OTC ClearingNon-OTC Clearing Post Trade: CC&G/ Monte Titoli ClearingSettlement, Custody & Other Capital Markets Primary MarketsSecondary Markets – equitiesSecondary Markets – fixed income, derivatives and other Technology Services Technology Services Segment Revenue1 Revenue£2,135mHK$20.7bnEBITDA£1,045mHK$10.1bnEBITDA Margin49%3-Yr EBITDA CAGR25.0%Debt3,A£2,320mHK$22.5bn Leading market infrastructure player in Europe, with world leading businessesin information services, post trade, capital markets and technology 40% 38% 19% 3% Information Services Post Trade Services2 Capital Markets Technology Services
7 Combined Business Would Be Competitive, Scaled And Robust Capital Markets Cash Markets Derivatives Markets Post-Trade Clearing Custody & Settlement Information Services and Technology Index Market Data Technology ORB AIM SwapClearCC&G Monte Titoli IDEM UnaVista RNS SEDOLReal-Time Data HKSCC(Cash)HKCC(Futures & Options)SEOCH(Stock Options)OTC Clear(OTC Deriv.)LME Clear(Base Metals) HKSCC(Cash Market Securities Depository) Market Data SEHK Highly complementary businesses diversified across asset class, geography and verticals positioned for ongoinginnovation and application of new technologies to the benefit of market stakeholders SEHK(Structured Products & Stock Options)HKFE(Futures & Options)(Base Metals) (Indexing) HKEX LSEG HKEXLMEBayConnect
8 Deal Overview – Proposed Key Terms Based on the closing price of HK$245.20 per HKEX share on 10 September 2019 and a £:HK$ exchange rate of £1=HK$9.6865. Equity value refers to the entire issued and to be issued ordinary share capital of LSEGVWAP since 29 July 2019, the first trading date after the first announcement of the Refinitiv transaction, to 10 September 2019 Purchase Price LSEG shareholders receive per LSEG share: 2,045 pence in cash and 2.495 HKEX sharesImplying c.8,361 pence per share, c.£29.6 billion equity value1 Premium 22.9% premium to LSEG closing share price on 10 Sep 201922.4% premium to VWAP LSEG price2 Structure To be implemented by way of a recommended scheme of arrangement, with optionality to implement by way of a contractual offer Governance Have regard to UK corporate governance best practices, appropriate for a leading global market infrastructure group Listing Primary listing in Hong Kong and intends to apply for a secondary listing in London Approvals Transaction subject to customary regulatory and anti-trust approvals Financing Financed from existing cash resources and new credit facilities
9 Transaction Framework and Key Stages Subject to a 28-day deadline from the “Possible Offer” Announcement, which may be extended with the consent of the Board of LSEG and the Takeover PanelA statement of intention not to make an offer under Rule 2.8 would be issued and HKEX would be required to stop work on an offer for the target for a minimum period of 6 months Including approvals from financial regulators (e.g. FCA), anti-trust and other authorities and the shareholders of HKEXIncluding LSEG shareholder approval and UK court sanction UK Regulatory Framework This transaction is governed by the Takeover Panel and the UK Takeover Code (“theCode”)The Code provides an orderly framework within which takeovers of UK public companies are conductedGoverns issues including timing, communications and protection of shareholder and other stakeholder interests Key Stages of Proposed Transaction “Firm Offer” Announcement (Rule 2.7)1 “Possible Offer”Announcement (Rule 2.4) No Offer Announced2 Rule 2.4 or “Possible Offer” Announcement: public announcement confirming a possible offer is being consideredRule 2.7 or “Firm Offer” Announcement: public announcement of a firm intention to make an offer containing full details of the offer terms and its conditions Regulatory, Antitrust andOther Approvals3 Scheme Document/ Prospectus Transaction Completion Scheme Process4 OVERVIEW OF STEPS FOLLOWING A “FIRM OFFER” ANNOUNCEMENT (IF UNDER SCHEME OF ARRANGEMENT) Key Documentation Under the Code STRUCTURE OF PROPOSED TRANSACTIONHKEX intends to implement by a recommended scheme of arrangementHowever, HKEX reserves the right to implement by way of a contractual offer
10 Conclusion The proposed combination with LSEG represents a highly compelling strategicopportunity to create a global market infrastructure leader This would strengthen both the businesses of HKEX and LSEG, better positioning them to innovate across markets and geographies, and offer market participants and investors unprecedented global market connectivity The two businesses are highly complementary, and a combination would offer prospects of significant synergies. HKEX is confident that this would be highly compelling for both HKEX and LSEG shareholders