Members of Congress Urge Treasury to Investigate Potential Purchase of Stock Exchange by Chinese Buyer
Forty-five members of Congress signed a letter urging the Department of Treasury ("Treasury") Committee on Foreign Investment in the United States ("CFIUS") to conduct a "full and rigorous" investigation into the potential acquisition of the Chicago Stock Exchange by Chinese company Chongqing Casin Enterprise Group ("CCEG"). The Chairman of the Congressional Task Force on Terrorism, who is also a member of the House Financial Services Committee, led the group of signees.
The letter states: "transparency concerns extend to every aspect of China and its governance." The authors accuse the Chinese government of crimes ranging from human rights violations to the practice of electronic espionage. Additionally, they contend that the CCEG manifests the traditional "opaque" qualities of a Chinese company, and that the CCEG could be tied to the Chinese government and the military. The authors urge Congress to conduct a "full and rigorous investigation," and indicate that there could be sufficient cause for CFIUS to "deny this acquisition."
Commentary
Although CFIUS is not required to conduct this review simply because Congress has requested one, it is likely to comply. Indeed, CFIUS has conducted reviews of several recent transactions involving Chinese buyers, and the outcomes of those reviews suggest that the Chicago Stock Exchange transaction may not fare well. Dutch electronics company Phillips recently tried to sell its Lumileds LED Division to a Chinese company and CFIUS blocked the sale. A pending transaction between Chinese Unisplendour and Western Digital, a maker of hard drives, also seems to be disturbing to CFIUS members: the parties withdrew their original joint request for approval and refiled it in January 2016. Such developments forewarn that unless and until potential sales of U.S. companies to Chinese-owned businesses begin to receive the green light from CFIUS, neither the parties nor the investor should bank on closing this transaction.