IntercontinentalExchange Inc. (ICE) said Monday the board of directors of CBOT Holdings Inc. has given the go-ahead to talks with ICE relating to its proposed acquisition of the Chicago Board of Trade parent company.
“We are pleased that the CBOT board has determined that ICE’s proposal is or could reasonably be expected to lead to a superior proposal, which enables CBOT to begin discussions and exchange information with us,” said ICE CEO Jeffrey C. Sprecher. “We look forward to meeting with CBOT’s management and advisors to begin the due diligence process. As we previously said, we are confident we can complete our review and be in a position to execute a definitive agreement within a week.”
ICE also announced the cancellation of an informational meeting to be held with the CBOT board Wednesday.
Monday, ICE said it delivered its formal proposal to the CBOT board and that it accepts substantially all of the terms of CBOT’s previously proposed merger agreement with Chicago Mercantile Exchange Holdings Inc. (CME) (see Daily GPI, March 16).
“We believe the ICE offer clearly constitutes a superior proposal under the terms of CBOT’s agreement with CME,” Sprecher said. “Our offer provides more than $1 billion, or over $21 per share, in additional current value, and it also offers greater synergies and a much larger ownership stake in a better positioned, faster growing company headquartered in Chicago that would be the world’s most comprehensive derivatives exchange.”
Based on Friday’s closing prices, the ICE offer is valued at $179.46 per CBOT share, 13.3% above the $158.42 value per CBOT share of the CME transaction, ICE said. Under the ICE offer, the combined company would continue the Chicago Board of Trade name and leverage it as it creates an operating company for its regulated futures exchanges in Chicago, New York, London and Dublin, Ireland. CBOT shareholders would own approximately 51.5% of the combined company vs. only 31% in the CME transaction, increasing their participation in the substantial strategic and financial benefits of the combination.
In a statement following announcement of the rival ICE bid for CBOT, CME said it was standing behind its offer. “We are confident that the CME/CBOT merger will create a strong combination and provide significant and unique benefits for shareholders and customers of both companies,” CME said Thursday. “We are working toward the successful completion of our transaction.”
Unlike with a CME/CBOT combination, ICE said it believes there are no significant antitrust risks in an ICE/CBOT combination. There is no indication as to when the outcome of the regulatory review of the CME/CBOT combination by the U.S. Department of Justice will become known. ICE and CBOT have complementary product offerings and an ICE/CBOT combination would have virtually no product overlap.
Based on Futures Industry Association data, an ICE/CBOT combination would have pro forma 2006 U.S. market share of 33.4% vs. 87.3% for a CME/CBOT combination (including Nymex contracts traded on Globex). A CME/CBOT combination would have 100% market share in interest rates; 99.7% in equity indices; and 96.8% in foreign currencies, ICE said.
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