The Chicago Stock Exchange said a Chinese investor group agreed to acquire it, giving the buyer entry into the intensely competitive U.S. equity market.
Chongqing Casin Enterprise Group has signed a definitive agreement to acquire the company, according to a statement Friday. The deal values the Chicago Stock Exchange at less than $100 million, according to a person familiar with the matter, who asked to not be identified because the terms weren’t disclosed publicly. The exchange expects the deal to close in the second half of the year, though that will require regulatory approval.
“We’re a good fit. Our strategy is something they like and is consistent with theirs,” Chicago Stock Exchange Chief Executive Officer John Kerin said in a phone interview. “We provide technology and we’re a standalone, full-service exchange that they can grow in a manner that suits their needs.”
The acquisition would be the first of a U.S. exchange by a Chinese company. The 134-year-old bourse only handles about 0.5 percent of U.S. stock trading, but a deal gives a buyer a beachhead in the $22 trillion American equity market. There’s also the potential for growth given that regulations require trades to be routed to whichever exchange has the best price for a stock at a given moment.
Sales of stocks exchanges, which tend to be national symbols, have faced political objections in the past. When Germany’s Deutsche Boerse AG wanted to buy the owner of the New York Stock Exchange in 2011, U.S. Senator Charles Schumer, a Democrat from New York, raised obstacles. Singapore’s stock exchange tried to buy Australia’s in 2010, but the Australian government barred that from happening.
That said, the Chicago Stock Exchange is a far less vital part of global finance. The New York Stock Exchange, for instance, handled 31 times more trading volume on Thursday.
Casin Group said it was attracted to the market because of the potential to “bring exciting Chinese growth companies to U.S. investors,” according to a quote in the statement from Shengju Lu, Casin’s founder and chairman.
Founded in the 1990s through a privatization of state-owned assets, Casin Group initially focused on developing real estate projects in Chongqing before expanding into the environmental and financial industries. While the firm owns stakes in banks and insurers, it has never owned an exchange. Calls to the company’s Chongqing headquarters went unanswered on Friday.
“We have reviewed CHX’s plans to improve market share through new growth initiatives and fully support them,” said Casin’s Lu, a torch bearer during the Beijing Olympic games in 2008, according to the statement.
Casin Group’s offer comes amid an unprecedented overseas shopping spree by Chinese companies. Businesses from Asia’s largest economy have announced $70 billion of cross-border acquisitions and investments this year, on track to break last year’s record of $123 billion, according to data compiled by Bloomberg.
The Chicago Stock Exchange — a subsidiary of CHX Holdings Inc. — is minority-owned by a group including E*Trade Financial Corp., Bank of America Corp., Goldman Sachs Group Inc. and JPMorgan Chase & Co., according to the company. The minority shareholders are also selling their stake, Kerin said.
The Chicago Stock Exchange was advised by GCA Savvian Advisors LLC and Sidley Austin LLP on the transaction, according to the statement. Broadhaven Capital Partners and Orrick Herrington & Sutcliffe LLP worked with Casin. Mark O’Connor, a spokesman for the exchange, declined to comment on the size of the transaction.