As the July 9 Chicago Board of Trade (CBOT) shareholder and member vote on the Chicago Mercantile Exchange’s (CME) merger offer approaches, Atlanta-based IntercontinentaExchange (ICE) continues to lobby that its CBOT offer is “superior” on all fronts.

The competition for CBOT’s hand has heated up over the last few weeks as ICE and CME have both submitted numerous merger plan revisions while also taking their bids directly to CBOT’s members and shareholders through letters and speeches (see Daily GPI, June 26; June 25). The companies are all awaiting the July 9 vote by CBOT’s members and shareholders on CME’s merger proposal. In mid-June, CBOT’s board unanimously reaffirmed its recommendation that CBOT Holdings shareholders vote in favor of the revised merger agreement with CME (see Daily GPI, June 15).

In a letter to CBOT shareholders on Wednesday, ICE CEO Jeffrey C. Sprecher urged CBOT’s people not to be sold short by its board of directors, adding that shareholders can stop CME from buying CBOT on the cheap.

“Your board has agreed to sell CBOT to CME in a transaction that significantly undervalues your company,” Sprecher said in the letter. “Rather than match ICE’s higher offer, CME has yet again low-balled you with a supposedly enhanced offer that doesn’t reflect the true value of your company — and will be paid for by CBOT’s own improved earnings prospects. Instead of putting their money on the table, CME has continued to wage a campaign of low-road rhetoric in an attempt to scare you into voting for their inferior transaction.”

Sprecher added that before ICE entered the fray, the CBOT board had agreed to sell to the CME in a transaction that was then worth $151.28 per CBOT share. “Since then, CBOT’s consensus EPS estimates have risen by 25% for 2007 and 22% for 2008. Yet CME has only increased its original bid by 22%: 16% on May 11 with a higher exchange ratio, and 6% on June 14 through a contingent special dividend. And you wouldn’t have gotten even this apparent increase from the CME without ICE’s superior proposal. Over the same period, CME’s 2007 and 2008 consensus EPS estimates have increased by just 2% and 3%, respectively. It’s a sweet deal for the slow-growing CME — but a bad deal for you,” he added.

CME fired back on Wednesday announcing that advisory firm Institutional Shareholder Services Inc. (ISS) has recommended that CME and CBOT shareholders vote for the merger with each other. In recommending that CME shareholders vote to approve the merger, ISS said: “The deal may strategically position the combined company to be the leader for derivatives trading in a consolidating industry environment… Based on our review of the terms of the transaction and the factors described above, particularly the strategic rationale and the positive market reaction, we believe the merger warrants shareholder support.”

“We are pleased that a leading proxy advisory firm recognizes the compelling value that the CME/CBOT merger will provide for our shareholders,” said CME Executive Chairman Terry Duffy. “The July 9, 2007, Special Meeting of Shareholders is rapidly approaching. On behalf of the entire board of directors of CME, I urge all CME shareholders to vote ‘FOR’ the proposed merger.”

“ISS’s recommendations that both CME and CBOT shareholders vote ‘FOR’ our merger — and ISS’s separate recommendation that CBOT shareholders reject the ICE proxy solicitation — represent additional important milestones toward the completion of our merger with the Chicago Board of Trade,” said CME CEO Craig Donohue. “We look forward to the July 9 shareholder vote and to integrating our two organizations so that we can begin delivering the many benefits this merger will create for our shareholders, members and customers.”

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