For-profit vote clears way for CBOT IPO
April 15, 2005
BY DAVID ROEDER Business Reporter
Members of the Chicago Board of Trade were nearly unanimous Thursday in voting to reorganize as a for-profit company, and its chairman left little doubt that the exchange will pursue an initial stock offering soon.
Chairman Charles Carey said that with the historic change now final at the 157-year-old exchange, he expects it will quickly register its new securities by filing with the federal government a form known as an S-1. "It's my hope that we file an S-1 as soon as it's reasonably possible," Carey said.
That legal step would allow the CBOT to take several steps, from selling stock to raising private equity. "But it's obvious that there's one step on our minds," he said. Carey declined to discuss plans in greater detail.
Members hope an initial public offering will be as lucrative as the one the Chicago Mercantile Exchange launched in December 2002. The Merc went public at $35 a share and the stock closed Thursday at $178.99.
The stock is down sharply from its high, set Jan. 3, of $230.25. Investors have grown nervous about declining revenue per contract at the Merc. Volumes at both the Merc and the CBOT, however, remain at record levels.
"Everybody's seen how the Merc has been so successful and that's what's been behind the rise in our seat prices," Carey said. The highest grade of CBOT memberships, known as seats, have grown in value from $300,000 each a couple of years ago to a current $1.4 million.
More than 99 percent of members ratified the for-profit switch. At least 1,020 votes favored each of five propositions to carry out the reorganization, with the opposition ranging from seven to 10 votes. Once paperwork is completed in a few days, the exchange will be owned by CBOT Holdings Inc. and the former members will become shareholders.
The idea is to free the exchange to pursue partnerships and new business in the fast-moving futures industry without tying it to cumbersome membership votes. One such vote would be needed if the exchange seeks an IPO, but otherwise decisions from now on rest with the board of directors.
The Merc became the first U.S. exchange to shed the traditional identity of member ownership as a nonprofit. Since then, numerous markets domestic and foreign have taken or considered that step. The Chicago Stock Exchange endorsed the switch last November.
The CBOT talked of doing so for a long time. Approval was held up by a lawsuit brought by so-called minority members, those with limited trading rights, over their ownership stake in the reorganized exchange. A settlement last fall gave those members a 22 percent share.
In addition, the CBOT had to wait out a settlement with the Chicago Board Options Exchange over shared rights at the two markets.
The CBOT -- the nation's second busiest futures exchange, after the Merc -- is known as the center for futures in agricultural commodities, U.S. Treasury debt and trading in the Dow Jones industrial average. |
