Chicago Mercantile Exchange Holdings Inc. (CME) upped its bid for the Chicago Board of Trade's (CBOT) parent company by 16% on May 11, to nearly $10 billion in an effort to end a bidding war.
The CME also pledged a cash buyback of up to $3.5 billion worth of the combined company’s common stock, at a fixed price of $560 per share, if the deal goes through.
CBOT Holdings Inc., which operates the Board of Trade, recommended shareholders accept the revised CME bid, deeming the offer superior to an unsolicited bid from Intercontinental Exchange Holdings Inc. (ICE), even though ICE's offer was still higher – $10.5 billion vs. $9.9 billion, based on Friday's closing stock prices.
In a press release, CBOT Chairman Charlie Carey said it makes more sense for his company to join forces with the CME because the two exchanges share a common arrangement to clear the contracts traded on their floors.
A CME-CBOT combination poses “significantly less integration risk” than a deal with ICE, Carey said.
The CME counter-offer had been anticipated ever since March when Atlanta-based ICE launched its surprise takeover bid, disrupting plans announced five months earlier for the CME to buy CBOT for about $8 billion.
The two exchanges hope to close the deal by the middle of the year, pending shareholder and regulatory approvals. Shareholders are set to vote on the deal July 9.
The focus of attention now shifts to ICE to see if it will come back with a stronger bid.
In a statement, the exchange said its March bid offered greater value to shareholders and better growth prospects than CME's revised one, and said it was “reviewing this morning's announcement and evaluating our options.”
According to the Associated Press, ICE Chairman and Chief Executive Jeffrey Sprecher did not respond to its request for comment.
“Unless ICE comes back and raises their own offer, this would probably be the one to seal it,” Morningstar analyst Patrick O'Shaughnessy told the AP. “I'm not sure it would make sense financially for them to do so. But never count Jeff Sprecher out.”
Editor’s note: Richard Brock, The Corn And Soybean Digest's Marketing Editor, is president of Brock Associates, a farm market advisory firm, and publisher of The Brock Report.
To see more market perspectives, visit Brock's Web site at www.brockreport.com.