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U.S. backers boost stakes in Chicago bourse bid stalled over China ties
November 6, 2017 / 6:47 PM / 11 days ago

U.S. backers boost stakes in Chicago bourse bid stalled over China ties

NEW YORK (Reuters) - U.S. investors have agreed to increase their stake in a deal to buy the Chicago Stock Exchange (CHX) to prevent the politically sensitive bid, led by China-based investors, from falling apart, sources familiar with the matter said.

A sale would mark the first time Chinese investors have been direct owners of a U.S. stock exchange. Worth up to $25 million, the deal has drawn the attention of several lawmakers who have argued that despite its small size, a sale could expose the U.S. financial system to undue influence from the Chinese government.

The future of CHX has been in limbo since August, when the U.S. Securities and Exchange Commission stayed a decision by its staff approving the sale to a consortium of 13 investors, led by China-based Chongqing Casin Enterprise Group.

The planned sale, which was announced in February 2016, was cleared in December by the Committee on Foreign Investment in the United States, which scrutinizes deals for potential national security concerns.

Three would-be investors - China-based Chongqing Jintian Industrial Co Ltd and Chongqing Longshang Decoration Co Ltd, and U.S.-based Xian Tong Enterprises, Inc. - have dropped out because of the delays, said the sources, who asked to remain anonymous because the details are not public.

Under the new structure, Chinese ownership of CHX would be reduced to 40 percent, compared with 49.5 percent under the earlier plan. The remaining 60 percent would be owned by U.S.-based investors who are not Chinese citizens, the people said.

Executives at CHX, which has a market share of just 0.5 percent, have argued the deal would create U.S. jobs and investments. One of the long-term objectives of the deal is to list Chinese companies on the exchange, they said.

President Donald Trump, prior to being elected, brought the deal up twice during a February 2016 Republican primary debate as an example of how jobs and wealth were leaving the United States.

Trump is scheduled to begin a 3-day visit to China on Wednesday. Executives from nearly 30 U.S.-based companies, including Goldman Sachs Group Inc (GS.N), General Electric Co (GE.N) and Boeing Co (BA.N), will join him on a trade mission, led by U.S. Commerce Secretary Wilbur Ross, aimed at signing deals worth billions in U.S. investments.

A spokesman for CHX declined to comment on the new deal structure, but said CHX executives were not invited on the U.S. trade mission to China.

Reporting by John McCrank; Editing by Dan Grebler

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