The Intercontinental Exchange Inc. has stepped up its efforts on Wednesday to block the merger of the Chicago Mercantile Exchange and the Chicago Board of Trade, taking move to set off a proxy fight if the CBOT continues planning to merge with the Merc. The final efforts are being fiercely undertaken in the war to acquire CBOT, marking a struggle that could change the format of the fast-growing derivatives market. However, majority of opinion still believe that the CBOT’s original suitor, the CME still holds the upper hand. Therefore the general opinion is still tilted in favor of CME despite the fact that the other company in the CBOT hunt, Atlanta-based Intercontinental Exchange is offering as much as 10 percent more for the company.
The recent efforts taken by ICE has marked the second time it has mounted the pressure to stop the merger with the Merc and win the CBOT for itself. On Tuesday, ICE revised its previous stock-for-stock offer for the CBOT by allowing shareholders to take a total of $2.5 billion in cash for all or part of their holdings in the exchange. On the other hand, the Merc’s offer is for stock only. Then Jeffrey Sprecher, ICE’s chief executive, on Wednesday decided to request the Securities and Exchange Commission to approve a proxy statement asking CBOT shareholders and traders to reject the Merc’s current offer.
Sprecher in his statement has said, ‘if it got to the point that the [Merc] proposal was going ahead, we would ask their shareholders to reject it because we do not believe it to be superior to ours’. He further repeated that in case if the Board of Trade accepts ICE’s offer, the company will relocate its headquarters from Atlanta and retain the name of Chicago Board of Trade for the exchange. As a matter of fact, while keeping Board of Trade headquartered in Chicago and relocating its current headquarter to Chicago, Sprecher would be able to take advantage of the city’s strong trading resources, technological expertise and group of skilled people.
Earlier this week, the US Justice Department has given approval to the CME-CBOT merger by saying it would not object to the deal on antitrust grounds. Some traders were apprehensive of the deal following the reasoning that a new huge Chicago exchange could unjustly dominate US derivatives trading. Analysts say the competition over CBOT may be decided by factors other than price. The value of both the offers, attached to stock prices, rise and fall from day-to-day, but ICE’s bid is almost 10 percent higher at current prices. At the same time, Supporter for the CME-CBOT merger argue that it does not need to compete with ICE’s offer. They further believe that there are too many other long-term advantages that one giant Chicago exchange would enjoy.
Officials of both the firms say that their mergers could offer many new derivatives products and would result in millions of dollars in cost savings. The CME has also proposed that it is intended launch a $3.5 billion buyback program, which could retire up to 12 percent of the new company’s shares.
Even though ICE is fighting an uphill battle in its pursuit to displace the CME, but the latest development has certainly placed ICE CEO Jeff Sprecher as a force to reckon with, in the exchange sphere.
