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ICE's $1B Merger with NYBOT a Done Deal

Electronic energy marketplace IntercontinentalExchange (ICE) said late Friday it has consummated its $1 billion-plus merger with the New York Board of Trade (NYBOT), the 100-year-old open outcry exchange for sugar, coffee, cocoa, cotton and other commodities and financial products. The transaction consideration comprised 10.297 million shares of ICE common stock and $400 million in cash.

As a result of the merger, NYBOT has become a wholly owned subsidiary of ICE and is now part of a for-profit, publicly traded corporation for the first time in its history. The acquisition also provides ICE with a wholly owned clearinghouse, which was seen as one of the initial reasons for the merger when it was announced last September (see Daily GPI, Sept. 18, 2006). On Friday, ICE shares fell $1.81 to close at $134.73 on the New York Stock Exchange.

"This is a momentous day, and we are proud to welcome the NYBOT as a valued member of the ICE family," said ICE CEO Jeffrey C. Sprecher. "We are already beginning to leverage our strengths for the benefit of customers and shareholders, setting a new standard within the industry with our diverse product line of futures and over-the-counter offerings. Our commitment to growth, innovation and customer service will play out in continued product offerings and the enhancement of our world-class electronic trading and clearing platforms."

Last week, ICE announced that the NYBOT soft commodity contracts would be listed for trading on the ICE electronic trading platform beginning Jan. 19, which became more crucial after the New York Mercantile Exchange's (Nymex) announcement in late December that it intended to enter the soft agricultural commodity futures markets, which would directly compete with NYBOT (see Daily GPI, Dec. 22, 2006). In response to the move, NYBOT accused Nymex of a "transparent attempt to interfere" with its merger with ICE.

Going forward, NYBOT said it believed it could benefit from ICE's technology. "We believe that through this transaction, we have created a premier global commodity marketplace," said Frederick W. Schoenhut, chairman of the NYBOT. "Our longstanding commitment to serving the NYBOT's constituencies is reinforced with this move as we pave the way for our continued success as a part of a world-class marketplace. As a part of the ICE team, we believe we can make a strong contribution to the group, as well as benefit from ICE's innovations in technology and products to serve a diverse global customer base."

The number of shares of ICE common stock issued pursuant to the merger agreement represents approximately 15% of the issued and outstanding share capital of ICE. Computershare Shareholder Services Inc., as exchange agent, will deliver the applicable merger consideration to each NYBOT member by Jan. 29, after the exchange agent has applied the proration mechanics and determined the allocations of merger consideration between ICE common stock and cash based on the NYBOT members' completed transmittal materials. Evercore Group LLC served as the exclusive financial advisor to ICE on the transaction, and Brown Brothers Harriman & Co. served as the financial advisor to NYBOT on the transaction.

NYBOT board directors Fred W. Schoenhut and Terrence F. Martell have joined the ICE board of directors. ICE said it will continue to operate its businesses under the respective regulatory regimes of the home country of each exchange or marketplace. The combined business includes NYBOT, operating as a U.S. futures exchange under U.S. CFTC regulation, in addition to London-based ICE Futures, which is regulated by the U.K. Financial Services Authority. ICE's global over-the-counter electronic platform continues to operate as an exempt commercial market under the U.S. Commodity Exchange Act.

In connection with the acquisition of NYBOT, ICE entered into senior unsecured credit facilities in the aggregate principal amount of $500 million on Jan. 12. The credit facilities include a $250 million five-year floating rate term loan and a $250 million revolving credit line. The credit facilities were arranged by Wachovia Bank, National Association and Bank of America, NA.

ICE said it used the proceeds of the $250 million term loan along with $150 million of cash on hand to finance the $400 million cash component of the merger consideration. ICE said the remaining $250 million capacity currently available under the revolving credit line can be used for general corporate purposes.

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