In a surprising move, Chicago Mercantile Exchange raised its offer to acquire its rival, the Chicago Board of Trade. Both the exchanges announced a revised merger agreement and said that they expect regulators to endorse the deal before it is put to shareholder votes on July 9. The latest agreement, which is valued at around $9.8 billion and also entails a $3.5 billion share buyback offer, would now put pressure on Intercontinental Exchange Inc. to fine-tune the terms of the unsolicited bid it submitted for CBOT in March. CBOT, parent company of the Chicago Board of Trade, said Friday that its board of directors had determined that ICE’s offer wasn’t superior to the CME. Interestingly, it has not raised its offer above the competing offer from Intercontinental Exchange.
The Intercontinental Exchange has issued a curt statement signaling that it was not ready to leave the ground yet. Its has proposed deal offers Board of Trade shareholders ‘greater immediate and long-term value as well as better growth prospects than its acquisition by CME,’ the statement said. In October, the Chicago Merc had announced that it had agreed to purchase the Board of Trade for about $8 billion. In March, IntercontinentalExchange extended a counter offer for the board when it launched an unsolicited all-stock bid for CBOT that topped the original offer. Based on Friday trading prices, the ICE offer is worth $197.79 per share, or $10.5 billion total.
In the meanwhile, antitrust regulators are delaying the Chicago Mercantile Exchange’s proposed takeover of the Chicago Board of Trade, a combination that would create a near-monopoly in US futures contracts for interest rates and stock indexes. CBOT and Chicago Mercantile have said that the merger will help them stay competitive as exchanges combine worldwide. The US Justice Department has been investigating the proposed merger of the two Chicago companies because of their dominant positions in so-called financial futures. According to experts and analysts, together they would be in charge of all exchange-traded US futures and options on interest rates, 99.7 percent of those based on equity indexes, and 96.8 percent of futures and options on foreign currencies.
Acquisition of CBOT is unquestionably alluring for both Chicago Mercantile and Intercontinental. A combination of the Chicago exchanges would have supremacy in the US market of some of the fastest growing and most profitable asset classes. On the other hand, Intercontinental is also very strong in a lucrative and high-growth asset class, namely energy products. Therefore, this deal is an enormously compelling transaction for both companies.
