The three investors, who own a combined 3 per cent of LSE, said HKEX has been lobbying them to back a potential US$39 billion cash and share offer for the London exchange after it made a surprise approach last month.

LSE quickly rejected HKEX’s initial approach, saying it faced regulatory hurdles and did not make strategic sense.

The London exchange has already agreed a separate US$27 billion deal to buy data provider Refinitiv, in which professional information company and Reuters News parent Thomson Reuters holds a 45 per cent stake.

HKEX now has until October 9 to make a formal bid or walk away, and its executives have been meeting LSE’s top shareholders to garner their support.
HKEX makes US$36.6 billion surprise bid to take over London Stock Exchange

Guy de Blonay, manager of the Jupiter Financial Opportunities Fund, who met HKEX co-president Romnesh Lamba, said HKEX would have to increase the per share price to between £90-100, up from the initial approach of around £83.61 for shareholders to take it seriously.

De Blonay said it would also need to increase the cash component. The initial proposal was around 25 per cent cash, with the rest in HKEX stock.

A banking source close to the deal said that £90-100 was “what most investors asked for”. The Hong Kong exchange has been looking for financing to see if it can meet a higher bid price, the source close to the deal said.

A bid in this range could prompt the LSE board to ask for an extension to the October deadline, De Blonay said, and move HKEX towards creating a powerhouse spanning Asia, Europe and the United States, and better able to compete with US rivals.

“[HKEX chief executive] Charles Li knows this is a one-off opportunity, and I would expect him to carry on fighting,” de Blonay said, pointing to considerable political hurdles and a possible backlash among HKEX’s own shareholders that could still scupper a higher recommended bid.

Two other LSE shareholders said they too expected HKEX to lift the headline price of its offer. The investors, who declined to be named, were however sceptical that a deal would pass regulatory muster, saying a bigger price tag may still not be enough to land Li his prize.

HKEX declined to comment on its plans on Thursday. LSE also declined to comment.

Reuters was not able to ascertain the views of some of LSE’s largest shareholders, including those who also hold a stake in the Asian bourse.

Li has been vocal in highlighting the long-term benefits of his deal versus the “short-term” earnings boost of the LSE-Refinitiv tie-up.

Li, a former offshore oil worker, lawyer, journalist and investment banker, has overseen HKEX’s transformation into the world’s largest capital-raising venue in five of the past 10 years.

Last week Li said that his team had been working on a takeover approach for a long time, but uncertainty around Britain’s exit from the European Union had any delayed action until the LSE announced its plan to buy Refinitiv in August.

The LSE board has so far stood by its deal with Refinitiv, which the HKEX proposal requires its London rival to abandon.

HKEX’s proposed deal is widely expected to draw regulatory scrutiny in Britain, Italy and the US, which is locked in a trade war with China, if it proceeds.

Several “big bang” exchange mergers have failed in recent years, opposed by politicians and regulators, and the LSE bid has raised concerns that China would have undue influence because some HKEX board members are appointed by Hong Kong’s government.

Li has said he is open to review governance.

As it gears up to push ahead with an offer, HKEX’s Lamba has met investors and hedge funds in the US over the past two weeks, two sources said.

It has also added HSBC and UBS to its financing advisory line-up over the past two weeks, regulatory filings show.

The HKEX deal has been orchestrated with the help of US advisory firm Moelis, whose lead banker Caroline Silver is one of the most prominent exchange bankers.