(Adds details on Lattice deal)
By John McCrank
NEW YORK Nov 28 Chicago Stock Exchange Inc
(CHX) has released new information related to its proposed
takeover by an investor group led by China's Chongqing Casin
Enterprise Group, in part to make clear that the Chinese
government is not involved in the deal.
The planned sale of CHX came under fire almost immediately
after it was announced in February, with a group of 46 U.S.
lawmakers voicing concerns about the level of influence the
Chinese state might have over one of the oldest U.S. exchanges.
Worries over China's growing economic influence were
highlighted during the U.S. election campaign with
now-President-elect Donald Trump pledging to impose 45 percent
tariffs on Chinese goods and to label the country a currency
manipulator on his first day in office.
In the proposed CHX deal, none of the potential investors or
companies involved directly, or indirectly, are controlled by
the Chinese government, CHX said in a 280-page regulatory filing
made public on Monday but dated Nov. 25.
The rules of the deal also safeguard against future
government interference, James Ongena, general counsel at CHX,
said in an interview.
"If the government did acquire one of these companies or
even became an investor in one of these companies, that
investment could be called back to the holding company and
whoever that investor or company was, would be kicked out of the
group," he said.
If the deal goes through, CHX has said it would revamp its
listings program to attract medium-sized businesses that do not
qualify to be listed on the Nasdaq or Intercontinental
Exchange Inc's New York Stock Exchange.
Other deals involving Chinese buyers are facing greater
scrutiny. On Monday, Reuters reported previously unknown links
between the Chinese government and an investor group planning to
buy U.S.-based chip maker Lattice Semiconductor Corp,
which may pose new risks for the transaction.
The 134-year-old CHX, which has less than 0.5 percent market
share in U.S. equities, would also woo companies in China
looking to list in the United States, giving Chinese investors
more access to the U.S. market.
There are around 1.4 billion people in China, 120 million
brokerage accounts, and a massive backlog of companies wanting
to go public, said John Kerin, CHX's CEO.
"To the extent that we could even get a percentage of that
to participate, it would be a tremendous benefit to both of our
economies," Ongena said. "We are talking about enabling trading
between the two largest economies in the world."
CHX management would remain in place following a deal.
Non-U.S. investor firms in the proposed deal include NA
Casin Group, owned by Chongqing Casin, the filing showed.
U.S. firms included Castle YAC Enterprises, an investment
vehicle for Jay Lu, a U.S. citizen who is also vice president of
NA Casin Group, and is the son of Shengju Lu, the chairman of
Together, the two firms would control 39 percent of CHX, but
their voting rights would be capped at 20 percent, Ongena said.
The deal is under review by the U.S. Securities and Exchange
Commission and the Committee on Foreign Investment in the United
States (CFIUS), a government panel that scrutinizes deals over
national security concerns. Kerin said he expects to hear back
from CFIUS around the end of December.
(Reporting by John McCrank; Editing by Lauren Tara LaCapra,
Jonathan Oatis and Lisa Shumaker)