A WALL STREET JOURNAL ONLINE NEWS ROUNDUP
October 17, 2006 9:00 a.m.
Chicago Mercantile Exchange Holdings Inc. agreed to acquire CBOT Holdings Inc., creating a massive global derivatives exchange at a time when trading in futures contracts and other derivatives has increased dramatically.
The deal calls for a swap of 0.3006 shares of Chicago Mercantile Class A common stock for each CBOT Class A common share. The deal is valued at about $8 billion. CBOT shareholders can also elect to receive the cash equivalent to the value of the exchange ratio based on a ten-day average of closing prices for Chicago Mercantile shares at the time of the merger, but the cash portion of the total consideration will be limited to $3 billion.
Upon completion of the deal, Chicago Mercantile stockholders will own about 69% of the combined company with CBOT's shareholders owning the remaining 31% stake.
The deal comes at a time when mergers have heated up in the industry and trading volume has increased sharply. NYSE Group Inc., the parent of the New York Stock Exchange, is in the midst of a deal with European exchange operator Euronext NV. Other combinations include a possible deal between Nasdaq Stock Market Inc. and London Stock Exchange PLC. In recent weeks several exchanges have mulled buying other exchanges, such as the New York Board of Trade or the Chicago Board Options Exchange.
Even when markets are heading south, as they did in September, professional traders such as hedge funds are executing an increasing number of trades to capitalize on small shifts in asset prices. More trading means more revenue for exchanges from trading fees. Today, in its earnings report, CBOT Holdings said average daily trading volume in the quarter ended Sept. 30 was 3.2 million contracts, up 23% from the year-ago period, and just off the second quarter's pace.
Terrence A. Duffy, chairman of CME, will become chairman of the combined company, to be called CME Group Inc. Charles P. Carey, chairman of CBOT, will be the vice-chairman of the combined organization. Craig Donohue will be the CEO of the company. The deal is expected to close by mid-2007.
"We are very pleased to announce this strategic merger today," said Mr. Duffy, in a statement. "We have enjoyed a strong, productive relationship with CBOT for a number of years, including our historic clearing agreement in 2003 in which CME began clearing all CBOT trades. This merger takes us to the next level in the evolution of our high-growth business."
In premarket action, shares of CBOT were up 16%. Shares of CME, which closed at $503.25 on the New York Stock Exchange Monday, were up 3.7% in premarket action, according to Nasdaq. Based on Monday's closing prices, the combined company has an equity value of $25 billion.
The firm will have average trading volume of futures, options and other global derivatives approaching nine million contracts per day, or about $4.2 trillion in value. The Chicago Merc's primary products include futures and options on interest rates, stock indexes, foreign exchange and commodities, while the CBOT trades futures and options on interest rate, agricultural, metals, energy and equity indexes.
The companies expect the deal to add to earnings in 12 to 18 months following completion, which is anticipated by mid-year 2007. The companies see pretax cost savings from the deal of more than $125 million starting in the second full year following closing.
Separately, CBOT Holdings said Tuesday that third-quarter net income for the three months ended Sept. 30 more than doubled to $48.8 million, or 92 cents a share, from $19.8 million, or 40 cents a share, in the year-earlier period. Revenue rose to 45% to $163 million. Analysts surveyed by Thomson First Call forecast earnings, on average, of 80 cents a share on revenue of $155.1 million
October 17, 2006 9:00 a.m.
Chicago Mercantile Exchange Holdings Inc. agreed to acquire CBOT Holdings Inc., creating a massive global derivatives exchange at a time when trading in futures contracts and other derivatives has increased dramatically.
The deal calls for a swap of 0.3006 shares of Chicago Mercantile Class A common stock for each CBOT Class A common share. The deal is valued at about $8 billion. CBOT shareholders can also elect to receive the cash equivalent to the value of the exchange ratio based on a ten-day average of closing prices for Chicago Mercantile shares at the time of the merger, but the cash portion of the total consideration will be limited to $3 billion.
Upon completion of the deal, Chicago Mercantile stockholders will own about 69% of the combined company with CBOT's shareholders owning the remaining 31% stake.
The deal comes at a time when mergers have heated up in the industry and trading volume has increased sharply. NYSE Group Inc., the parent of the New York Stock Exchange, is in the midst of a deal with European exchange operator Euronext NV. Other combinations include a possible deal between Nasdaq Stock Market Inc. and London Stock Exchange PLC. In recent weeks several exchanges have mulled buying other exchanges, such as the New York Board of Trade or the Chicago Board Options Exchange.
Even when markets are heading south, as they did in September, professional traders such as hedge funds are executing an increasing number of trades to capitalize on small shifts in asset prices. More trading means more revenue for exchanges from trading fees. Today, in its earnings report, CBOT Holdings said average daily trading volume in the quarter ended Sept. 30 was 3.2 million contracts, up 23% from the year-ago period, and just off the second quarter's pace.
Terrence A. Duffy, chairman of CME, will become chairman of the combined company, to be called CME Group Inc. Charles P. Carey, chairman of CBOT, will be the vice-chairman of the combined organization. Craig Donohue will be the CEO of the company. The deal is expected to close by mid-2007.
"We are very pleased to announce this strategic merger today," said Mr. Duffy, in a statement. "We have enjoyed a strong, productive relationship with CBOT for a number of years, including our historic clearing agreement in 2003 in which CME began clearing all CBOT trades. This merger takes us to the next level in the evolution of our high-growth business."
In premarket action, shares of CBOT were up 16%. Shares of CME, which closed at $503.25 on the New York Stock Exchange Monday, were up 3.7% in premarket action, according to Nasdaq. Based on Monday's closing prices, the combined company has an equity value of $25 billion.
The firm will have average trading volume of futures, options and other global derivatives approaching nine million contracts per day, or about $4.2 trillion in value. The Chicago Merc's primary products include futures and options on interest rates, stock indexes, foreign exchange and commodities, while the CBOT trades futures and options on interest rate, agricultural, metals, energy and equity indexes.
The companies expect the deal to add to earnings in 12 to 18 months following completion, which is anticipated by mid-year 2007. The companies see pretax cost savings from the deal of more than $125 million starting in the second full year following closing.
Separately, CBOT Holdings said Tuesday that third-quarter net income for the three months ended Sept. 30 more than doubled to $48.8 million, or 92 cents a share, from $19.8 million, or 40 cents a share, in the year-earlier period. Revenue rose to 45% to $163 million. Analysts surveyed by Thomson First Call forecast earnings, on average, of 80 cents a share on revenue of $155.1 million
