Following up on its promise made earlier in June, IntercontinentalExchange Inc. (ICE) said last week that it has filed a definitive proxy statement with the Securities and Exchange Commission (SEC) to solicit votes opposing the proposed acquisition of the Chicago Board of Trade (CBOT) by the Chicago Mercantile Exchange (CME).

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 NGI, 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 NGI, June 18).

Last week, ICE also commenced the mailing of its definitive proxy materials to CBOT stockholders. ICE said it seeks support from CBOT stockholders and urges them to reject the proposed CBOT/CME combination as inferior. As fully detailed in the definitive proxy statement, ICE believes CBOT stockholders should reject the proposed CBOT/CME combination because:

“By voting no on July 9, you can stop this inferior deal and send a message to your board that you want it to consider ICE’s superior proposal,” said ICE CEO Jeffrey C. Sprecher.

ICE also noted that before it made its competing bid, the CBOT board had agreed to sell CBOT to the CME in a transaction that was then worth $151.28 per CBOT share. Since then, CBOT’s consensus earnings per share (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,” Sprecher told CBOT members in a letter. “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.”

Also last week, CBOT executives once again urged their members and shareholders to vote for the CME merger proposal. “You are about to make a very important decision about the future of your business and your industry,” said CBOT Chairman Charlie Carey and CBOT CEO Bernie Dan in a letter to shareholders and members. “On July 9, you are being asked to cast a vote in favor of the merger of CBOT Holdings with Chicago Mercantile Exchange Holdings (CME). Together these two entities would create the largest and most competitive global futures exchange in the world.

“Our boards concluded after a thorough review of the proposal from ICE that a combination with CME is a much better strategic fit that will allow us to pursue immediate and long-term growth opportunities. We determined that the ICE proposal was NOT superior to the combination with CME. CME will help us compete and win in an increasingly competitive and rapidly changing global marketplace.”

CBOT also announced that Institutional Shareholder Services (ISS) has recommended that CBOT stockholders vote for the merger agreement with CME. “The functionality and scale of a derivative exchange’s clearing and electronic trading platform are critical components for successful integration.More important than scale, however, is functionality,” ISS said. “In a merger with CME, integration risk is low because, among other things, CME and CBOT have already completed a common clearing link in 2003. This common clearing link also gives CBOT/CME a leg up in the amount of time it would take to complete the integration.”

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