The IntercontinentalExchange Inc. (ICE) is launching a competing bid for CBOT Holdings Inc., which already has a deal to merge with the Chicago Mercantile Exchange.
ICE announced it has made a proposal to the board of directors of the CBOT to combine the two companies in a stock-for-stock transaction that would create the world’s most comprehensive derivatives exchange.
ICE said the US$9.9 billion offer is a 10.5% premium to CBOT’s current merger deal with Chicago Mercantile Exchange Holdings Inc.
“The combination would result in a premier global futures and over-the-counter derivatives marketplace headquartered in Chicago. The combined company would have a leading presence in the major derivatives categories, including agricultural and energy products, interest rates and metals, and would be supported by integrated clearing capabilities and state-of-the-art trading technology,” it says. “The transaction would promote competition and innovation in the domestic and global derivatives markets while providing superior opportunities to leverage the complementary strengths of ICE and CBOT to drive growth, customer benefits, and shareholder value.”
Under the proposed transaction: ICE would issue 1.42 shares for each CBOT Class A common share, valued at US$187.34 per CBOT share based on yesterday’s closing price of ICE shares. This represents a 12.8% premium to CBOT’s current share price, and a 39.3% premium to its share price on October 16, 2006, the day before announcement of its merger agreement with the CME, and a premium of 10.5% to the current value of the pending CME/CBOT transaction to CBOT shareholders.
CBOT shareholders would own approximately 51.5% of the combined company and, in addition to receiving a premium, would participate in the significant strategic and financial benefits of the combination, it notes.
ICE also said it will commit to the same terms as the CME offer regarding CBOT’s open auction markets and will protect and grow the CBOT metals complex. “Unlike a combination of CME and CBOT, ICE believes no significant antitrust or other regulatory risks exist in a combination of ICE and CBOT and a transaction could be completed quickly, thereby delivering both near-term and long-term benefits to all stakeholders of both ICE and CBOT,” it said.
It also estimates transaction benefits of at least US$240 million annually upon the full integration of ICE and CBOT. “In addition to identified expense rationalization and the revenue growth opportunities available to the combined company, significant clearing benefits also exist as ICE could provide a fully operational clearing solution for CBOT’s products upon termination of CBOT’s existing clearing agreement with CME in January, 2009,” it adds. “Accordingly, ICE believes the combination would be accretive to cash earnings per share within 18 months of closing.” With access to CBOT and its management, ICE expects to identify additional opportunities for the combined company.
“This is an extremely compelling combination for Chicago Board of Trade and IntercontinentalExchange shareholders, trading members, customers, clearing firms, employees, the derivatives industry and the city of Chicago,” said Jeffrey Sprecher, chairman and CEO of ICE. “The CBOT Board of Directors has the opportunity to achieve a transaction that offers a considerable premium to the pending CME transaction and, at the same time, secures the CBOT’s position as a leading independent global derivatives complex based in Chicago. The combined company would be extremely well positioned in nearly every high-growth derivatives segment, and would have the platform to capitalize on the many emerging growth opportunities in the dynamic derivatives landscape on a global scale. The transaction we are proposing is clearly superior to a combination with the CME for CBOT’s shareholders and other stakeholders.”
Morgan Stanley is serving as financial advisor to ICE and Sullivan and Cromwell LLP is serving as legal advisor to ICE.
ICE launches US$9.9 billion unsolicited bid for CBOT
Competing bid would create world’s most comprehensive derivatives exchange
- By: James Langton
- March 15, 2007 March 15, 2007
- 09:20