The merger of CME Group and Nymex Holdings cleared its largest hurdle Monday afternoon as Nymex’s shareholders and its 816 seatholders voted to accept the merger proposal. With the approval out of the way, the closing date of the union, which has been valued recently anywhere between $7.9 billion to $8.4 billion, is scheduled to take place on Friday (Aug. 22), when Nymex Holdings will merge with and into CMEG NY Inc., a wholly owned subsidiary of CME Group.

Late Monday afternoon, the companies announced that preliminary results indicated that shareholders of both companies and Nymex Class A members have approved the proposed merger.

“We are pleased that shareholders of both exchanges have given their support for this transaction,” said Terry Duffy, CME Group’s chairman. “The addition of Nymex to CME Group creates an even stronger international company as we continue to grow our business globally and compete with exchanges and the over-the-counter market. The combination of these exchanges will create immediate and long-term value for our shareholders and customers as we are now the only exchange to offer access to every global benchmark product.”

The member and shareholder vote was anything but a foregone conclusion (see Daily GPI, Aug. 18). News circulating earlier in the month alluded to the possibility that the merger might be in jeopardy over tax treatment. According to a Wall Street Journal article, some Nymex members were ready to revolt unless the member payout could be classified as capital gains instead of ordinary income. Late last month Nymex agreed to a final offer that increased the consideration payable to Nymex Class A members from $612,000 to $750,000 per membership (see Daily GPI, July 21). According to the newspaper, the payout classified as ordinary income would lower its value after taxes to about $472,000.

A Reuters report Monday said Nymex member Robert Sahn is expecting fellow members to push for a ruling from the Internal Revenue Service on how to tax a payout from CME Group.

“Today’s votes bring us one step closer to combining our two great exchanges which will allow us to deliver more value to our customers and shareholders,” said Richard Schaeffer, chairman of Nymex Holdings. “We look forward to building on our shared legacies through product innovation and industry leadership to capitalize on the terrific growth opportunities we see in this global marketplace.”

After dancing for two months over the details and the structure of the deal, CME and Nymex agreed to the deal in principle in mid-March. The megamerger of CME Group’s Chicago Mercantile Exchange and Nymex Holdings’ New York Mercantile Exchange is expected to provide market participants access to the “leading financial and agricultural exchange” and the “leading energy and metals exchange” in a regulated, transparent marketplace distributed around the world through the enhanced speed and capacity of the CME Globex electronic platform, according to the companies (see Daily GPI, March 18).

“The merger is really just the next logical step. The big development was the one in the spring of 2006 when Nymex and CME did the deal to funnel Nymex electronic trading onto the CME’s Globex platform,” said a New York analyst. “That was the deal that changed the landscape as far as energy trading is concerned. The merger probably means a lot more to the people who work at Nymex and the CME than it does for the users of either exchange. I think we are still going to be trading natural gas and energy futures with a point and a click, so from a practical standpoint, it is not a bullish or bearish deal. On a day-to-day basis, it will be a nonevent for traders.”

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