Intercontinental Exchange Inc., which handles 45 percent of global oil futures trading, surprised financial markets by making an unsolicited $10 billion bid for the Chicago Board of Trade to prevent a $25 billion purchase by Chicago Mercantile Exchange Holdings Inc. The offer by the seven-year-old ICE, to merge with the almost 160-year-old Board of Trade would surpass the price of the pending deal, announced in October last year. The acquisition would unite the longtime Chicago rivals into the largest market for financial derivatives contracts in the world.
Atlanta based ICE has offered a 10.5 percent premium over the value of the pending $8 billion deal. It is offering 1.42 shares for each CBOT Holdings Inc. share, assessing the company’s value at $187.34 a share or 13 percent above yesterday’s closing price. On the other hand, Chicago Mercantile’s cash and stock purchase was valued $8.9 billion, or $169.53 a share against yesterday’s closing price.
In this situation, CME is left with the option of improving its existing offer; however, its scope to boost the cash component is limited by the aspiration of CBOT investors to retain shares to reap any potential advantage from any interlinked rights to participate in a float of the Chicago Board Options Exchange. CME officials have further hinted that they could be forced to look overseas if challengers blocked the CBOT acquisition, while Deutsche Börse or its Eurex unit remaining as the only viable options.
Responding to the offer CBOT said in a statement that its board would review the proposal ‘in a manner consistent with their duties and a merger agreement with CME.’ Experts are of the view that the bid is also a signal that the Mercantile Exchange-Board of Trade combination might not survive regulatory scrutiny.
