Oct 17, 2006 12:05 pm US/Central
Mercantile Exchange To Buy Board Of Trade
Deal Worth $8 Billion
CHICAGO (CBS) ―
With
Chicago Mercantile Exchange Holdings Inc. agreeing to purchase
Chicago Board of Trade Holdings Inc., a rivalry that dates back more than a century will end in the creation of a multi-billion dollar powerhouse.
The CME said it had bought CBOT for $8 billion in a move to create a global derivatives exchange with average daily trading volume approaching 9 million contracts per day.
The combined company will be named
CME Group Inc., and will be headquartered in Chicago.
As CBS 2's Sylvia Gomez reports, the rivalry between the CME and the CBOT goes back to the 19th century. But the deal that is ending the rivalry is already yielding a profit.
The news sent CBOT shares soaring $21.50, or 16 percent, to $156.01 in premarket trading on the INET, indicating the stock may open above its 52-week high of $140.67. CME shares rose $17.75, or 3.5 percent, to $521 in early electronic activity.
Talks between the two companies have been underway for about a year, but executives say they have thought about doing this for decades.
CBOT stockholders will have the right to receive 0.3006 shares of CME common stock for each CBOT share, or cash equal to the value of the exchange ratio based on a 10-day average of closing prices of CME common stock at the time of the merger.
The cash portion of the purchase price won't exceed $3 billion. If no shareholders elect to receive cash, shareholders of CME will own 69 percent of the merged company and CBOT holders will own 31 percent, with CME issuing about 15.9 million shares valued at about $8 billion.
Based on Monday's closing stock prices of both companies, the merged company is valued at $25 billion. The merger is expected to add to earnings in 12 to 18 months after closing, and deliver pretax cost savings of more than $125 million beginning in the second full year after completion.
CME Chairman Terrence A. Duffy will become chairman of the combined organization, and CBOT Chairman Charles P. Carey will become vice chairman. CME CEO Craig S. Donohue will serve as CEO of the new company with CBOT CEO Bernard W. Dan remaining in his current position to oversee CBOT's activities, products and customers until the transaction is complete, at which time he will serve as special adviser to the combined company for one year.
The transaction is expected to close by midyear 2007, pending approvals by regulators and shareholders of both companies and CBOT members.
(© 2006 CBS Broadcasting Inc. All Rights Reserved. This material may not be published, broadcast, rewritten, or redistributed. The Associated Press contributed to this report.)
