Hong Kong Exchanges and Clearing(HKXCF) (HKEX) said Wednesday it had made a proposal to the board of the LSE(LNSTY) to "combine the two companies" in a cash and share deal worth £29.6 billion, or £31.6 billion ($39 billion) including debt.
The deal would "redefine global capital markets for decades to come," HKEX CEO Charles Li said in a statement.
It would reinforce Hong Kong's position as the key connection between mainland China, Asia and the rest of the world, HKEX said.
The announcement comes hot on the heels of the LSE's £22 billion ($27 billion) deal to acquire financial data company Refinitiv. That deal is aimed at transforming the LSE into a global markets and information juggernaut to rival Michael Bloomberg's financial data empire.
Shares in the LSE spiked as much as 11% on the news of Hong Kong's offer, before trimming those gains slightly.
In a statement, the LSE described the offer as "unsolicited, preliminary and highly conditional."
"The board ... will consider this proposal and will make a further announcement in due course," it said, adding that it remained committed to its proposed acquisition of Refinitiv and expected to write to shareholders seeking their approval for that deal in November.
Hong Kong's offer comes at a sensitive time. Brexit uncertainty is casting a shadow over London's role as a global financial center. At the same time, Hong Kong — Asia's premier financial hub — has been rocked by months of pro-democracy protests.
HKEX said it would seek a secondary listing of its shares on the LSE after the transaction was completed to reflect its commitment to the United Kingdom.
Hong Kong Exchanges and Clearing(HKXCF) (HKEX) said Wednesday it had made a proposal to the board of the LSE(LNSTY) to "combine the two companies" in a cash and share deal worth £29.6 billion ($37 billion), or £31.6 billion ($39 billion) including debt.
The deal would "redefine global capital markets for decades to come," HKEX CEO Charles Li said in a statement.
It would reinforce Hong Kong's position as the key connection between mainland China, Asia and the rest of the world, HKEX said.
The announcement comes hot on the heels of the LSE's £22 billion ($27 billion) acquisition of financial data company Refinitiv. That deal was aimed at transforming the LSE into a global markets and information juggernaut to rival Michael Bloomberg's financial data empire.
An aerial view of the London Stock Exchange Paternoster Square
Vulture Labs | Moment | Getty Images
Hong Kong Exchanges and Clearing Limited (HKEX) said Wednesday it has made a proposal to the board of London Stock Exchange Group Plc (LSE) to combine the two companies which values the LSE at about 29.6 billion pounds ($36.6 billion).
LSE in August agreed to buy financial information provider Refinitiv in a $27 billion deal aimed at offering trading across regions and currencies and establishing the British company as a rival to Bloomberg.
LSE shares rallied shortly after 10:00 a.m. London time, rising by 8.5%.
The HKEX said the deal would be funded by a combination of existing cash and a new credit facility. It cautioned, however, that its statement to the market should be considered as an announcement to make a possible offer and is not confirmation of a firm intention to bid.
HKEX said it expected key LSE management to keep their jobs and work for the new owners.
This is a breaking news story, please check back later for more.
Chinese shipping containers are stored beside a US flag after they were unloaded at the Port of Los Angeles in Long Beach, California on May 14, 2019. - Global markets remain on red alert over a trade war between the two superpowers China and the US, that most observers warn could shatter global economic growth, and hurt demand for commodities like oil. (Photo by Mark RALSTON / AFP) (Photo credit should read MARK RALSTON/AFP/Getty Images)
MARK RALSTON | AFP | Getty Images
Some American companies in China are speeding up their move away from the mainland as increasing tariffs continue to hurt their businesses. That's according to a survey released by the American Chamber of Commerce in Shanghai on Wednesday.
More than a quarter of the respondents – or 26.5% – said that in the past year, they have redirected investments originally planned for China to other regions. That's an increase of 6.9 percentage points from last year, the AmCham report said, noting that technology, hardware, software and services industries had the highest level of changes in investment destination.
The research, conducted in partnership with PwC, surveyed 333 members of the American Chamber of Commerce in Shanghai. It was conducted from June 27 to July 25 — during the period when U.S. President Donald Trump and Chinese President Xi Jinping agreed to resume trade talks, and before the latest escalation in retaliatory tariffs.
U.S. firms in the mainland also said restrictions to accessing the local market have made it difficult for them to carry out their business, the report said.
Asked about the best possible scenarios in ongoing trade negotiations, more than 40% of respondents said greater access to the domestic market would be the most important outcome to help their businesses succeed. That was followed by more than 28% that ranked improved intellectual property protection as key.
The third most hoped-for outcome of the trade talks was "increased purchases of U.S. goods," at 14.3%, the survey showed. That's in contrast to the Trump administration's latest efforts to pressure China into buying more American products, especially in agriculture.
Barred from market access
One of the longstanding complaints U.S. companies have about operating in China is that many industries are closed to foreign businesses. In the sectors that are open, it is difficult to compete with state-owned enterprises or privately owned companies that may benefit from local connections or policies, they say.
Allegations of forced transfer of critical technology to Chinese partners and lack of intellectual property protection are just some of the challenges U.S. businesses cite for operating in China.
The latest AmCham survey found accessing the local market remained one of the key problems companies faced, with more than half the respondents — or 56.4% — saying that obtaining licenses was not easy.
Still, with no sign of a trade agreement, 2019 will be a difficult year; without a trade deal, 2020 may be worse.
AmCham Shanghai and PwC survey
By industry, the one that most sought improved market access was the banking, finance and insurance sector. The high 81% of respondents in that sector seeking a better business environment contrasts with Beijing's announcements in the last 18 months that it will be relaxing foreign ownership rules in the financial sector. Some measures include allowing majority foreign ownership of a local securities venture and increased foreign ownership of local stocks.
However, survey respondents did note an overall improvement in nearly all issues of concern — including intellectual property protection and forced technology transfer. The proportion of businesses that said the Chinese government treats foreign and local companies equally also rose from 34% to 40% in the latest survey.
Tariffs hurting US firms
The U.S. business presence in China remains strong, with American companies and their affiliates raking in more than $450 billion in sales in the Asian country, according to an August report from research firm Gavekal Dragonomics. The analysis also pointed out that sales figure is more than twice the value of U.S. exports of goods and services to China.
But retaliatory tariffs from both sides are hitting revenues and causing some American firms to change their China strategy, the AmCham survey showed.
If Washington were to impose all the duties as threatened, essentially all Chinese goods exported to the U.S. will be subject to tariffs by the end of the year. In response to the increasing American duties, Beijing has countered with tariffs of its own on U.S. exports to China.
Just over half of the survey respondents said revenue has decreased as a result of the increased tariffs. One third of them attributed a drop of between 1% and 10% of revenue to the higher duties.
Overall profitability did not decline in 2018, the report said. But more respondents said revenue and margins declined last year, especially compared with operations in other countries. Pessimism levels shot up by 14 percentage points to about 21% — respondents felt less optimistic about the outlook for 2019 due in part to a slowing domestic economy.
Bright spots remain in China
The survey, however, did find some areas of optimism among respondents in China.
The pharmaceuticals, medical devices and life sciences category ranked among the industries with the most respondents reporting revenue growth last year. That sector also came in second among those most optimistic about 2019.
The AmCham report said the positive outlook was "likely due to government policy changes, including accelerated approvals of foreign drugs."
More than two-thirds of companies in food and agriculture planned to increase investment in 2019, the most of any industry, the report said. Retail and consumer companies also intended to invest more in China, especially in smaller cities where many analysts still see a major growth opportunity.
However, businesses are getting ready for a drawn out trade war between the two economic giants. Of those surveyed, 35% expect trade tensions to continue for another 1 to 3 years, while nearly 13% say it will go on for 3 to 6 years. About 17%, however, were even more pessimistic, and predict that the trade conflict will drag on indefinitely.
The report added: "Still, with no sign of a trade agreement, 2019 will be a difficult year; without a trade deal, 2020 may be worse."
The WeWork initial public offering is full speed ahead, sources familiar with the matter tell CNBC's David Faber, despite a number of a setbacks including a dramatic cut in its valuation and its biggest outside investor urging the controversial real estate company to shelve the offering.
The IPO roadshow is set to kick off as soon as Monday, the sources said.
WeWork's roadshow flies in the face of reported advice from its investor SoftBank, which will likely face a multi-billion dollar write down if WeWork debuts at a valuation between $15 and $20 billion. SoftBank had invested $2 billion in WeWork in January at a reported valuation of $47 billion. But WeWork's valuation was dramatically slashed, sources told Faber last week, as demand for the IPO was not there.
The We Co. is the formal parent company of WeWork. Founded in 2010 by CEO Adam Neumann, the company rents out work spaces to start-ups and other businesses.
WeWork's planned IPO has drawn many questions from Wall Street, especially due to a controversial remittance for Neumann. In July, the We Co. paid Neumann $5.9 million in a stock transaction for the trademark to "We." After the payment drew attention from critics, Neumann returned the stock last week, with the company explaining that the change was "at Adam's direction." The trademark is the property of We Holdings LLC, which is an investment vehicle of Neumann and co-founder Miguel McKelvey.
The company has over 500 locations, with plans to open nearly 170 new locations. The We Co. says that half of its memberships are based outside the U.S.
Jack Ma, China's richest man, is stepping down as the chairman of the $460 billion Alibaba Group he founded 20 years ago.
The company is now the world's largest e-commerce group. It was founded by Ma and 17 others in a small apartment in 1999.
Ma is worth almost $40 billion and is known for his love of extravagant celebrations, including mass employee weddings and music performances.
His farewell party is taking place in a 80,000-seat stadium.
Ma has picked Alibaba CEO Daniel Zhang to take over from him, who will face challenges from the US-China trade war and a slowing e-commerce industry in China.
Jack Ma — the flamboyant tech personality, and currently the richest man in China— is stepping down from his $460 billion Alibaba empire 20 years after he founded the company.
Ma is stepping down as the chairman of Alibaba Group on Tuesday, his 55th birthday, as part of a long-planned succession scheme. It is the world's largest e-commerce group, with more than triple the total reported sales of Amazon for 2018.
A former English teacher, Ma founded the company with 17 others in 1999. It began as a company that sold Chinese goods around the world, but shifted its focus to the domestic Chinese market as the country's economy boomed.
It later expanded into online banking, artificial intelligence, and entertainment.
While he is stepping down from a major leadership role, Ma said he will take a position in Alibaba's "partnership", a 38-person body that has an indirect role in the governance of the group.
Jack Ma. Sean Gallup/Getty Images
Daniel Zhang, who has been CEO of Alibaba since 2015, has been handpicked by Ma to take over, though he is unlikely to match Ma's famous flamboyance.
Ma is also known for the extravagant events he holds for employees during Alibaba's annual "Singles Day" shopping event, which outstrips Amazon's Prime Day for sales. The event has featured performers including Mariah Carey and a the Cirque du Soleil.
His style has also made its way into his resignation plans, which involve a farewell party at an 80,000-seat stadium in Hangzhou, the city where he founded the company decades ago, Reuters reported.
Jack Ma presided over an employee mass wedding of 102 couples. REUTERS/Stringer
Alibaba shared on Monday a video of Ma returning to that apartment, where he recalled telling early employees: "This is the place we're going to work for a year probably. We're going to eat here. We're going to sleep here. We're going to work day and night here.
"And we will probably achieve something. Or probably, we'll have to go out looking for jobs together."
He said their goal then was to be in the top 10 of the world's most popular websites, and to empower small businesses.
Zhang, Ma's successor, will also face challenges as the industry faces the ongoing trade war between the US and China and a slowdown in the Chinese e-commerce industry.
Liu Yiming, an analyst at Chinese tech publishing group 36kr, told Reuters: "If Alibaba wants to find new innovations or trends this is going to be more difficult than before."
Activist investor Elliott Management says AT&T’s wireless business isn’t just losing market share, it is also becoming less profitable.
Photo:
brendan mcdermid/Reuters
Elliott Management Corp.’s detailed criticism Monday of decisions made by AT&T’s leaders effectively praises rival
Verizon Communications Inc.
’s focus on upgrading its wireless network over becoming a media giant.
While AT&T has spent heavily on entertainment and advertising assets, Verizon has put building a faster 5G network at the center of its strategy. Investors have rewarded Verizon with a similar market valuation, even though AT&T has nearly 30% more annual revenue.
Displacing Verizon is a “potential reset of incredible importance,” Elliott wrote to AT&T’s board, arguing that the Dallas-based company’s wireless business isn’t just losing market share but is also becoming less profitable.
AT&T and Verizon have long been the two largest wireless providers in the U.S. by subscribers, but each has taken a different approach to generating new revenue in a wireless market. Technology giants and startups made billions on the back of the wireless connections that the carriers provided, leading each to seek ways to capture more of that spending.
Baby Bells Revisited
AT&T and Verizon have pursued two different strategies as they moved beyond the traditional phone business. Verizon doubled down on wireless, while AT&T pushed into media.
Market cap
$269B
AT&T
244
Verizon
Wireless revenue as a
percentage of total revenue*
42%
70
Total shareholder returns
over past five years
36%
49
Net debt to EBITDA ratio†
3.4 times
2.7
Employees
258,000
135,900
*As of end of 2018 †Last 12 months June 30, 2019
Sources: FactSet (market cap shareholder returns); the companies (revenue, employees);
“AT&T to a certain extent diversified away from the wireless business, despite the fact that the wireless business has been very good over the last few years, whereas the pay-TV and the traditional media business has been under more pressure than expected,” said
John Hodulik,
an analyst at UBS Group AG.
Many of the suggestions the activist made are already being implemented or are under discussion at AT&T, he said. Entering this week, AT&T has posted a total shareholder return—or stock-price changes plus dividends—of roughly 20% over the past year, compared with 14% for Verizon.
AT&T spent $49 billion to buy satellite-TV provider DirecTV and another $81 billion on Time Warner Inc., aiming to control content as well as connectivity. But cord-cutting has sapped customers from the pay-TV industry, prompting AT&T and others to launch streaming services.
On Monday, AT&T defended its current strategy and “the unique portfolio of valuable assets” it has assembled. “We look forward to engaging with Elliott,” AT&T said. “Indeed, many of the actions outlined are ones we are already executing today.”
Verizon spent $130 billion in 2014 to take full control of its wireless business but avoided a blockbuster media deal. It paid about $9 billion to buy AOL in 2015 and
Yahoo
two years later, but struggled to generate revenue and took a hefty charge to write down its internet business. Now, it focuses on partnering with content providers like YouTube TV.
Hans Vestberg,
who became Verizon’s chief executive last year, restructured the company’s business lines and has made wireless connectivity and finding new applications for 5G technology top priorities.
Verizon is also in the process of cutting $10 billion in costs, a plan that has included a large voluntary severance program as well as outsourcing efforts. A Verizon spokesman declined to comment.
Elliott called on AT&T to follow suit and cut more costs from its operations. “While revenue per employee was nearly identical at both companies just over a decade ago (~$400k), today Verizon’s revenue per employee (~$900k) is nearly 30% higher than AT&T’s (~$700k),” Elliot wrote.
Elliott told AT&T’s leaders that the next generation of wireless service presented an opportunity for the carrier to reclaim wireless market leadership. AT&T should gain, Elliott said, from its spectrum holdings as well as benefits associated with being the provider of the federally backed FirstNet communications system for emergency responders.
