The commodity exchange NYMEX Holdings Inc. has struck a deal with private equity firm General Atlantic LLC that will see General Atlantic take a 10% stake in the exchange for US$135 million. The pair are also planning an IPO for next year.

The gross proceeds from General Atlantic’s investment will be distributed to NYMEX shareholders in the form of an extraordinary cash distribution of approximately US$165,000 per share. NYMEX has no break-up fee, expense reimbursement or other financial obligation in the event the transaction does not occur. NYMEX has agreed not to seek other minority investment transactions.

NYMEX expects to file preliminary proxy materials with the Securities and Exchange Commission shortly and hold a shareholder meeting in early 2006 to approve the investment by General Atlantic. Upon completion of the transaction, which is subject to shareholder approval, General Atlantic will help NYMEX prepare for a potential initial public offering, which is expected to take place in 2006. It says that a public offering of NYMEX common stock would extend its leadership position and its ability to pursue a full range of strategic growth opportunities.

“We are very excited to have reached a definitive agreement with General Atlantic,” said Mitchell Steinhause, chairman of NYMEX. “General Atlantic’s minority investment is the best path forward for NYMEX and all of its constituents. We expect this partnership to help us solidify our market-leading position and continue our ongoing transformation by improving our corporate structure, technology and governance policies. General Atlantic’s extensive public company experience will enhance NYMEX.”

“We look forward to working with the board and management team of NYMEX as the exchange continues to strengthen its position as the leading liquidity center for the global energy commodity futures marketplace,” said Bill Ford, president of General Atlantic, who will join the NYMEX board upon completion of the transaction. “Led by open outcry trading, NYMEX is well positioned to extend its strong franchise with new products and further international initiatives.”

NYMEX and General Atlantic said they believe that open outcry trading, supported by a sound technology capability, is fundamental to NYMEX’s position as the leading liquidity center in the global commodity energy futures marketplace. There will be provisions to support and protect NYMEX’s open outcry trading, including a requirement for the continued financial support for technology, marketing and research for open outcry. These provisions also state that core futures and options contracts may not be eliminated without a vote of trading rights holders, as long as specified liquidity requirements are met. If the exchange ever terminates open outcry trading of a particular product, trading rights owners will receive additional payments based upon the electronic trading of that product.

NYMEX and General Atlantic share the goal of completing an IPO of NYMEX common stock in 2006. If there is no IPO by June 30, 2008, NYMEX will pay General Atlantic a cash dividend, calculated at an annual percentage rate of 5.5% of the initial investment and payable quarterly from the date of the transaction closing. The dividend, which would be paid only if there is no IPO by this date, would total approximately US$20 million. If there is no IPO within five years of the close of the transaction, General Atlantic may seek to redeem its shares at the original purchase price, plus accrued and unpaid dividends, and 100% of the equity interest in the exchange will return to the remaining shareholders.

Also, under the deal, NYMEX’s board will be reduced from 25 to 15 members to enhance its decision-making capabilities. Ford will join the board, and René Kern, managing director at General Atlantic, will serve as a non-voting observer to the board. General Atlantic will not be able to seek control of the board or the removal of any director from the board.

Consummation of the transaction will require the approval of NYMEX shareholders and the Commodity Futures Trading Commission. Subject to regulatory and shareholder approval, NYMEX and General Atlantic expect to complete the proposed transaction during the first quarter of 2006.

J.P. Morgan Securities Inc. serves as NYMEX’s chief financial advisor, and Skadden, Arps, Slate, Meagher & Flom LLP is providing legal counsel to NYMEX related to this transaction. Paul, Weiss, Rifkind Wharton and Garrison LLP served as legal counsel to General Atlantic.