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Chicago exchange sets out voting power in China bid

The Chicago Stock Exchange, which is seeking to win approval for a controversial takeover deal by Chinese investors, on Monday said that two companies controlled by the Lu family would own a combined 39 per cent of the exchange, but their voting power would be limited to 20 per cent.

In a filing with the Securities and Exchange Commission, the Chicago exchange detailed the underlying investors in its proposed acquisition by a group of backers led by China’s Chongqing Casin Enterprise Group. Chinese investors are set to own 49.5 per cent after the purchase.

The takeover would mark the first time a Chinese-led company took over a US bourse and it was met with some pushback in Washington when it was announced earlier this year. In a Republican presidential debate, Donald Trump, at the time a candidate for nomination, also cited the stock exchange takeover as an example of how America was losing its international competitiveness, the Financial Times reported.

The rationale for the deal, unveiled in February, is to provide a way for Chinese companies to list in the US as well as open the door for Chinese investors to buy US listed shares.

Founded in 1882, the Chicago Stock Exchange is the smallest of the designated US exchanges with about 1 per cent of US equity trading. The takeover requires SEC approval and the Chicago exchange has voluntarily submitted it for review by the Committee on Foreign Investment in the US, or Cfius, which has the power to block any deal that jeopardises US national security.

Jim Ongena, CSE’s general counsel, said that the terms in the filing would meet SEC rules for exchanges that prohibit any one entity from owning 40 per cent or more of the shares or a voting interest above 20 per cent.

NA Casin Group, which is wholly owned by Chongqing Casin would own 20 per cent in the deal while Castle YAC Enterprises would own 19 per cent. Chinese businessman Shengju Lu owns nearly 75 per cent of Chongqing Casin while his son Jay Lu, a US citizen and vice-president of Casin, is the sole member of Castel YAC. Given the family relationship, the collective voting interest is being fixed at 20 per cent.

Other members include Chinese-based groups Chongqing Jintian Industrial and Chongqing Longshang Decoration, with 15 per cent and 14.5 per cent, respectively.

Raptor, a private investment company of James Palotta, the president and chairman of AS Roma and a co-owner of the Boston Celtics, would own 11.75 per cent. Saliba, a private company of Anthony Saliba, who is the former chief executive of LiquidPoint, a Chicago-based options technology company, would have 11.75 per cent.

Xian Tong Enterprises, a US-based technology company, would have 6.94 per cent, the Chicago Stock Exchange Management team 0.88 per cent and brokerage Cheevers & Co 0.18 per cent.

The next step in the SEC process is to put the transaction up for public comment.

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