The Securities and Exchange Commission’s decision ends a process that lasted two years and took place in the crucible of a presidential campaign and a new administration that’s expressed skepticism over China’s policy motives. Now that it’s over, the exchange founded in 1882 is left handling less than 1 percent of daily U.S. stock trading, missing out on an audacious project to court smaller companies, particularly those based in China.
In a document posted on the SEC’s website Thursday, the regulator said the deal didn’t comply with U.S. rules governing stock exchanges. The SEC said it couldn’t resolve concerns about the proposed ownership structure, which would’ve given 29 percent of the company to a China-based shareholder. The Chicago Stock Exchange couldn’t supply documents the regulator requested about relationships among the proposed buyers, according to the SEC.
Will Ruben, a spokesman for the Chicago Stock Exchange, declined to comment.
Read More: Chicago Wants to Be a Hub for China Stock Trading
Though the transaction was relatively small, it drew outsize attention because of the country of origin of the lead investor, Chongqing Casin Enterprise Group Co. SEC Chairman Jay Clayton, who joined the agency this year following a career as a deals lawyer, has publicly fretted that it’s too hard for companies to go public in the U.S. The exchange had hoped to address that situation by selling itself, while also creating a conduit to China.
But opponents of the takeover, including a number of U.S. lawmakers, said letting a Chinese firm invest in a U.S. exchange was a bad idea. On the campaign trail, Donald Trump blasted the transaction after it was announced in early 2016. A year ago, the sale was cleared by a panel that reviews foreign takeovers for national security threats.
The deal hit a roadbump in August, when the SEC said its commissioners would review the sale, a surprise announcement that overrode the recommendation by the regulator’s staff that it should be approved.
After the process stalled, several investors dropped out. Two Chinese entities, Chongqing Jintian Industrial Co. and Chongqing Longshang Decoration Co., left the consortium along with U.S.-based Xian Tong Enterprises Inc. Together, they’d planned to buy 36.44 percent of the exchange. Other investors in the buyers’ group had agreed to purchase those stakes. In rejecting the takeover Thursday, the SEC said those three firms dropped out after the regulator asked for more information on their financial ties.
Source: Bloomberg News
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