Nymex Holdings last week said it pulled the trigger on a 10% equity sale to General Atlantic LLC, a global private equity firm that will buy the stake in the New York Mercantile Exchange for $135 million.
"Today's announcement follows a thorough review by our board of directors to determine the best long-term strategic direction for the Exchange in a competitive and dynamic industry," said Nymex Chairman Mitchell Steinhause. "Over the course of several months, we evaluated a number of bona fide investors, as well as other alternatives. We believe this transaction provides Nymex with the right balance of continued autonomy, open outcry trading protection, and an attractive valuation."
In August Nymex announced it was considering strategic alternatives including the possible issuance of an initial public offering (see NGI, Aug. 22). The Nymex board formed a special committee to lead the process. Two firms were allowed to conduct a three-week due diligence. Those were completed by Aug. 1. The firms were not disclosed but the names that cropped up in the rumor mill were Blackstone, Battery Ventures and General Atlantic (see NGI, April 25). In late August, reports were circulating that J.P. Morgan Chase & Co. was presenting a proposal to the Nymex board to set up an initial public offering for the Exchange.
Nymex said it plans to hold an informational presentation for shareholders and members in New York City on Sept. 29 to introduce General Atlantic and to discuss the proposed investment and other recent Nymex developments.
The proposed transaction values Nymex at $1.35 billion post-investment. If completed, the investment would serve as the next step in Nymex's continuing transformation, which began with its demutualization in 2000 to allow its members the opportunity to realize the equity value of their holdings. Nymex said the net proceeds from the investment would be distributed to its shareholders, noting that General Atlantic would not participate in that distribution.
"General Atlantic has a proven record of building value in the exchange sector," Steinhause added. "With General Atlantic's help, we will be able to preserve our rich heritage while growing and enhancing our business for the benefit of our shareholders, members, traders, customers and employees."
Consummation of the transaction will require successful negotiation and execution of definitive documentation as well as the approval of exchange shareholders and the Commodity Futures Trading Commission (CFTC). If completed, General Atlantic President Bill Ford will join Nymex's board.
General Atlantic LLC was founded in 1980 and has over $8 billion in capital under management. The company has invested in about 150 companies, with current holdings in 50 companies of which nearly one-half are based outside the United States.
Nymex collects fees on each transaction, using the revenue to house and run the exchange and paying out profits to the 816 seat-holders, who also are now shareholders in Nymex Holdings. Seat-holders may trade themselves on the exchange or may lease their trading rights.
The value of a seat increased from $2 million for a seat sold last October, to $2.5 million for a seat sold in June, and to between the $2.6 and $2.75 million for two seats sold on Aug. 17. Each seat represents ownership of one share of stock in Nymex holdings. Based on the value of the seats the exchange could be worth between $2 and $3 billion.
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