Five months after sale or merger talks stalled (see Daily GPI, Aug. 23, 2007), New York Mercantile Exchange parent Nymex Holdings reported Monday morning that it is in talks to be acquired by the CME Group, owner of the Chicago Mercantile Exchange, in what would be an $11 billion cash and stock deal.

Responding to market rumors, CME and Nymex confirmed that they are engaged in preliminary discussions and have agreed to a 30-day exclusive negotiating period. Under the terms being discussed, shareholders of Nymex would receive $36 in cash and 0.1323 of a share of CME’s common stock (the exchange ratio) in exchange for each Nymex share. CME said it expects to maintain trading floors in the New York City metropolitan area.

The potential transaction also contemplates that Nymex will repurchase the 816 New York Mercantile Exchange memberships upon closing of the potential acquisition for an aggregate purchase price not to exceed $500 million.

The combination of Nymex and CME would bring together two titans in the exchange arena. CME offers a wide range of benchmark products available across all major asset classes, including futures and options based on interest rates, equity indexes, foreign exchange, agricultural commodities and alternative investment products such as weather and real estate. Nymex’s main strength is the trading of energy and metals contracts. In June 2006 Nymex partnered with CME to list some contracts on CME’s electronic exchange Globex (see Daily GPI, June 12, 2006).

Over the past few years exchange mergers have been moving at a fast and furious pace as companies attempt to create synergies, expand product offerings and keep up with evolving technology. IntercontinentalExchange consummated its $1 billion-plus merger with the New York Board of Trade in early 2007 (see Daily GPI, Jan. 16, 2007), while the New York Stock Exchange got together with Euronext last April. CME completed its bid for the Chicago Board of Trade last summer (see Daily GPI, July 11, 2007) and earlier this month the New York Stock Exchange bought the American Stock Exchange.

Nymex and CME warned that discussions are in early stages and that the terms of any potential transaction may be materially different from what is being discussed. The transaction remains subject to negotiation of other terms, completion of due diligence, negotiation of terms of a definitive agreement and approvals of the boards of directors of both companies.

“There can be no assurances that any agreement will be reached or that a transaction will be completed on the terms set forth above or others,” the companies said. “We will have no further comment until an agreement is reached or the discussions are terminated.”

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