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Nymex, CME Hold Collective Breath Ahead of Vote

As CME Group and Nymex Holdings continue to keep their fingers crossed that stockholders and members will vote through their pending $8.4 billion merger, the companies reported Friday that the closing date of the union is scheduled for Aug. 22. If the deal is consummated, Nymex Holdings will merge with and into CMEG NY Inc., a wholly owned subsidiary of CME Group.

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 NGI, March 24).

The companies also announced Friday that the deadline for Nymex stockholders to elect the form of consideration they will receive will be 5 p.m. CDT on Aug. 20. While the merger is in the home stretch, there is grumbling about a potential stumble ahead of the finish line.

News circulating earlier in the week 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 increases the consideration payable to Nymex Class A members from $612,000 to $750,000 per membership (see NGI, July 21). According to the newspaper, the payout classified as ordinary income would lower its value after taxes to about $472,000.

Earlier in the week CME executives made a final plea to Nymex members regarding the Aug. 18 vote. "On a long-term strategic basis, this deal is the best option to grow and develop Nymex markets into the future," wrote CME Chairman Terry Duffy and CME CEO Craig Donohue. "This transaction will extend the benefits of the CME Globex technology agreement in perpetuity, and it will also allow Nymex customers to use one point of contact from trade matching through clearing. In short, CME Group is the best partner for Nymex."

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