Hong Kong Exchanges and Clearing Ltd (HKEX) unveiled a 39-billion-U.S.-dollar takeover approach to the London Stock Exchange Plc (LSE) on Wednesday that received a cool response from investors concerned about its regulatory and financial hurdles.

To prevail, HKEX would have to persuade British politicians and European regulators to abandon their deep-rooted scepticism over mergers of financial exchanges.

It would also have to woo LSE shareholders who are in favor of maintaining their ownership following LSE’s 27-billion-U.S.-dollar deal last month to acquire financial data provider Refinitiv. In an ominous sign for the deal’s prospects, LSE shares ended trading on Wednesday at a deep discount to HKEX’s offer price

With its bid, HKEX is betting that a major international acquisition will help it overcome uncertainty at home.

HKEX is also seeking to capitalize on the weakness of the British pound, which has been hit by Britain’s inability to settle on a deal to leave the European Union. The weaker pound has made British companies cheaper for foreign acquirers.

The proposed deal is aimed at creating a combined group better able to compete with U.S. rivals such as Intercontinental Exchange and CME Group. It is contingent on LSE abandoning the deal to acquire Refinitiv.

"The board of HKEX believes a proposed combination with LSE represents a highly compelling strategic opportunity to create a global market infrastructure leader,” the Hong Kong exchange said in a statement.

The LSE said it would review HKEX’s proposal. In a sign of its cool reception to HKEX’s bid, it added that it was committed to, and continued to, make good progress on its planned acquisition of Refinitiv from U.S. private equity firm Blackstone Group Inc and Thomson Reuters Corp. Thomson Reuters is the parent of Reuters News.

Spokespeople for Refinitiv, Blackstone and Thomson Reuters declined to comment.

Under the terms of the offer, LSE shareholders would receive 2,045 pence in cash and 2.495 newly-issued HKEX shares. HKEX said it intended to apply for a secondary listing of its shares on the LSE once the deal has gone through.

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