China | Chinese investor group to buy Chicago Stock Exchange

Chinese investor group to buy Chicago Stock Exchange

February 5, 2016 11:40 AM (UTC+8)

 

First acquisition of US exchange by a Chinese company is still subject to US approval

A Chinese-led investor group on Friday announced it has agreed to acquire Chicago Stock Exchange.

Chongqing Casin Enterprise Group will buy the 133-year-old exchange, which is expected to close in the second half of the year, but didn’t release the financial terms of the deal, according to a statement Friday.

chistkexchange“We’re a good fit. Our strategy is something they like and is consistent with theirs,” Chicago Stock Exchange Chief Executive Officer John Kerin told Bloomberg. “We provide technology and we’re a standalone, full-service exchange that they can grow in a manner that suits their needs.”

The Chicago Stock Exchange — a subsidiary of CHX Holdings Inc. — is minority-owned by a group including E*Trade Financial, Bank of America, Goldman Sachs Group and JPMorgan Chase, according to the company. The minority shareholders are also selling their stake, Kerin said.

The 134-year-old exchange, which handles about 0.5% of US stock trading, would give the buyer a beachhead in the $22 trillion American equity market, where regulations require trades to be routed to whichever exchange has the best price for a stock at a given moment.

This would be the first acquisition of a U.S. exchange by a Chinese company and would still need regulatory approval to go through. So, it’s not a done deal.

Stock exchanges are national symbols and political objections have derailed prior sales.  In 2011, US Senator Charles Schumer, a New York Democrat, prevented the sale of the New York Stock Exchange to Germany’s Deutsche Boerse. The previous year, the Australian government barred Singapore’s stock exchange from buying the Australian stock exchange.

Casin Group said it was attracted to the market because of the potential to “bring exciting Chinese growth companies to US investors,” Shengju Lu, Casin’s founder and chairman, said in a written statement. “We have reviewed Cox’s plans to improve market share through new growth initiatives and fully support them.”

The Casin Group, was founded in the 1990s through a privatization of state-owned assets. Initially a real estate company, it has since expanded into finance with the purchase of banks and insurers. This would be its entry into the exchange business.

This deal is part of a broader trend of Chinese companies going on an unprecedented shopping spree of buying foreign companies. According to Bloomberg, Chinese businesses have announced $70 billion of cross-border acquisitions and investments this year, on track to break last year’s record of $123 billion.

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