ICE Bids $9.9 Billion for CBOT
By Matthew Leising and Ye Xie
March 15 (Bloomberg) -- Intercontinental Exchange Inc., the market for 45 percent of global oil futures trades, made an unsolicited offer to buy the Chicago Board of Trade for $9.9 billion in stock, topping a planned purchase by Chicago Mercantile Exchange Holdings Inc.
Intercontinental offered 1.42 shares for each CBOT Holdings Inc. share, valuing the company at $187.34 a share or 13 percent above yesterday's closing price. Chief Executive Officer Jeffrey Sprecher said he would be willing to provide cash to some holders. Chicago Mercantile's cash and stock purchase was worth $8.9 billion or $169.53 a share as of yesterday.
Atlanta-based Intercontinental said its proposal would avoid antitrust concerns raised by the Chicago Mercantile deal, which must be approved by the U.S. Justice Department. The two Chicago exchanges, rivals for 100 years, would dominate trading of financial derivatives such as futures and options based on stocks, Treasuries and interest rates, which they pioneered.
``The antitrust issue would definitely be far less since their products don't overlap at all,'' said Craig Pirrong, director of energy markets for the University of Houston's Global Energy Management Institute. A possible detraction, he said, is that Intercontinental's bid provides fewer cost savings than the combination with Chicago Mercantile Exchange.
Intercontinental said its proposed combination would generate at least $240 million in annual savings because CBOT could use its clearing services and some functions could be combined.
CBOT spokesman Craig Grabiner declined to comment. Allan Schoenberg, a spokesman at Chicago Mercantile Exchange, didn't return a call seeking comment.
Energy Market
Chicago Board of Trade's revenue and profit surged last year on record trading of its financial futures and options and other products. Through February trading was up 21.4 percent compared with the same period last year.
A total of 805.9 million contracts changed hands on the CBOT last year, up 19.5 percent from 2005. Average daily volume was 3.21 million contracts, of which 2.54 million were financial products including futures and options on U.S. Treasury notes and bonds, interest-rate swaps, and the federal funds rate.
Intercontinental, which began as an electronic trading system for gas and power transactions, generates revenue through clearing private party transactions and from its U.K.-based ICE Futures exchange, which dominates trading of Brent crude oil, used as a benchmark outside the U.S. Its closest competitor is the New York Mercantile Exchange, the biggest energy market.
Intercontinental completed a $1.8 billion purchase of the New York Board of Trade in January, gaining an expanded offering of commodity futures and a clearinghouse. CBOT does not have its own clearinghouse and has used Chicago Mercantile Exchange for that service.
CBOT shares surged 14 percent, to $189.37 at 9:42 a.m. in New york Stock Exchange composite trading. Intercontinental added 21 cents to $132.14, and Chicago Mercantile shares fell $12.45 to $551.52. |
