After months of competition, wrangling and revised merger proposals, Chicago Mercantile Exchange Holdings Inc., parent of the 109-year-old Chicago Mercantile Exchange (CME), and CBOT Holdings Inc., parent of the 159-year-old Chicago Board of Trade (CBOT), announced last week that shareholders of both companies have approved their proposed merger and the transaction is complete. The companies said the merger has made the combined company the world’s largest and most diverse exchange, providing products in all major benchmark asset classes.

The shareholder vote effectively ended a rival bid for CBOT’s hand from Atlanta-based IntercontinentalExchange (ICE), which had been vigorously courting CBOT’s members and shareholders. Over the past two months, the back-and-forth battle for CBOT had intensified as CME and ICE took turns touting their proposals while attempting to discredit the opposing offer (see Daily GPI, July 9; July 5; July 2). While CME’s offer had the approval of CBOT’s board, ICE continued to attempt to convince CBOT’s membership and shareholders that its offer was “superior” on all fronts. CME’s final offer was valued at $11.9 billion, while ICE’s most recent offer stood at $11.7 billion.

Putting the icing on the cake, CME and CBOT said earlier this month that Caledonia Investments PYT. Ltd., CBOT’s largest shareholder, was endorsing the revised merger agreement and was in full support of the CME/CBOT combination.

“We are pleased that shareholders of both companies have demonstrated support for this groundbreaking merger,” said Terry Duffy, CME chairman. “The combination of CME and CBOT creates a strong international company better positioned to compete with growing global exchanges and the over-the-counter market. The combined company will transform the global derivatives industry and create efficiencies for customers and members while delivering significant benefits to our shareholders.”

CBOT Chairman Charles P. Carey added, “Today’s votes clear the way for us to combine our two great exchanges and begin delivering the value of the merger to our customers and shareholders. We look forward to building on our shared legacies of superior customer service, product innovation and industry leadership to capitalize on the terrific growth opportunities we see in this global marketplace.”

CME CEO Craig Donohue said the transition and integration should be smooth processes. “Our integration teams have been working diligently to prepare for the combination of our two companies, and I’m confident that we will be able to hit the ground running once we close the transaction,” he said. “With this successful vote, we are one step closer to realizing our vision. As a combined company, we will be the world’s premier financial marketplace with unparalleled product breadth and global reach. This vote also ensures that Chicago remains the center for risk management worldwide.”

The combined company is now called CME Group Inc., a CME/Chicago Board of Trade Company.

Conceding defeat, ICE said last week that while it was disappointed in the outcome, it thought the process was beneficial for its own stockholders as well as for stockholders of CBOT.

“Despite our disappointment in the outcome, our proposal has brought many benefits for both CBOT and ICE stockholders,” said ICE CEO Jeffrey C. Sprecher in a letter last week to CBOT’s members and shareholders. “For CBOT stockholders, ICE’s involvement has created nearly $3 billion in additional value through our willingness to recognize the true worth of your company. For ICE stockholders, we have shown our ability to leverage our position as one of the fastest growing, most global and most technologically sophisticated exchanges in the world.”

Sprecher added that the process also focused attention on ICE’s “unfailing entrepreneurial spirit,” product diversity and ability to manage organic growth and acquisitions. “ICE stockholders recognize ICE’s ability to build its business by innovating and seizing growth opportunities, and we’ll continue to aggressively pursue this philosophy,” he said. “In doing so, we will continue to put the interests of our stockholders and customers first.”

Addressing the constantly evolving exchange marketplace, Sprecher warned that the future winners in the industry may not be the biggest or oldest players. “Success will be determined by the ability to adapt quickly to changing markets and innovate responsively in creating new products and serving customers around the globe,” he told CBOT’s members. “ICE will remain focused in these areas, and we look forward to the opportunity to work with you in the future.”

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