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IPE Board Turn Its Back on NYMEX

IPE Board Turn Its Back on NYMEX

The board of directors for the London-based International Petroleum Exchange urged its members Wednesday to accept a buy-out offer from five outside investors rather than accept a proposed merger bid from the New York Mercantile Exchange. The 475 members of the IPE will vote on the sale at an extraordinary general meeting held on July 30. The board threatened to resign if the outside investor sale failed.

The group of investors is composed of British Gas plc., Distrigas, Enron, Nord Pool and OM Group. Through combined efforts, these five companies have offered the IPE $25 million pounds (U.S. $38.99 million) for 70% of the exchange. The companies made the offer in an open tender which closed in May. A simple majority of the membership needs to vote in favor of the sale for the outside investors to be successful.

The board support for the sale is a setback for NYMEX, which has been in merger discussions with the IPE since late last year (See Daily GPI, Nov. 23, 1998). Earlier this year, the U.S. exchange tendered an offer that was rejected by the IPE. Last week, NYMEX increased the valuation of its offer to $19.6 million pounds for 55% of IPE, in reaction to the bid from the five investors. The U.S. exchange said it increased its offer to match the value of the outside investor offer. Under the NYMEX proposal, the IPE would maintain a 30% interest.

"NYMEX made the IPE an offer that was identical financially to the outside investor proposal and, in our opinion, was far superior from a qualitative and strategic perspective," NYMEX said in a statement. It would not respond to the IPE board's comments. The NYMEX and the IPE account for almost all global energy futures trading. The NYMEX is the bigger of the two exchanges. Both the NYMEX and the IPE trade futures on crude oil, petroleum products and natural gas.

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