May 11, 2007 9:51 am US/Central
Merc Sweetens Offer For Board Of Trade
Atlanta-Based IntercontinentalExchange Is Also Out To Buy CBOT
CHICAGO (AP) ―
Chicago Mercantile Exchange Holdings Inc. sweetened its offer for CBOT Holdings Inc. by more than 16 percent on Friday, hoping to head off a still-higher counteroffer from IntercontinentalExchange Holdings Inc.
Chicago Mercantile Exchange raised its offer for CBOT Holdings, which operates the Chicago Board of Trade, to $174.28 per share, or $9.21 billion, in stock. That is up from its October bid of $149.68 per share, or $7.91 billion.
CME's latest bid is still lower than a rival offer from ICE, an Atlanta-based electronic exchange that earlier this year bought the New York Board of Trade. In March, ICE launched a takeover bid of $191.49 a share, of $10.12 billion for the Chicago Board of Trade.
CBOT Holdings said Friday that it has reviewed ICE's proposal and concluded it was not better than CME's latest offer.
These exchanges host trading of futures and derivatives, which are contracts that allow investors to bet on gold, oil, stock indexes, interest rates and other items without owning them by tying their value to the price of an underlying commodity.
As the volume of derivatives trading around the world accelerates, exchanges are trying to grow so they can offer more products and contracts and operate with lower costs. A combined CME and CBOT would host trading of almost 9 million contracts per day, representing $4.2 trillion worth of underlying commodities.
Chicago Board of Trade Chairman Charlie Carey said it makes more sense for CBOT Holdings to join forces with the Chicago Mercantile Exchange because the two trading platforms share a service to clear the contracts traded on its floors. A CME-CBOT tie-up poses "significantly less integration risk" than a deal with ICE, he said.
The CME threw in an additional sweetener with its revised bid: If the deal closes, the combined company will offer to buy back up to $3.5 billion of stock, or 12 percent of outstanding shares, for $560 per share. CME shareholders and current CBOT shareholders who would become CME shareholders under the deal would be eligible to sell their stock under the tender offer.
The buyback offer replaces a $3 billion feature of the original proposal, which allowed some CBOT shareholders to receive cash instead of CME stock.
The two Chicago-based exchanges expect to close the deal by the middle of the year, pending shareholder and regulatory approvals. Shareholders are set to vote on the deal June 9.
In premarket trading on Friday, shares of CBOT Holdings jumped $3.50 to $197.50 while CME's stock leaped $33.80, or 6.8 percent, to $531.75. Shares of IntercontinentalExchange rose $3.15, or 2.3 percent, to $138.
(© 2007 The Associated Press. All Rights Reserved. This material may not be published, broadcast, rewritten, or redistributed.)
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