When CME Group first announced that it would take a majority stake in Dow Jones Indexes a year ago my first thought was to ask if there would be any antitrust issues as CME Group has exclusive licenses with Standard & poor’s (a competitor to Dow Jones Indexes) to list futures products on its S&P 500 index as well as others. Neither Dow Jones Indexes nor CME Group seemed to worry it was an issue at the time. (more…)
Yesterday TMX Group and LSE Group announced a termination of their planned merger, just one day before shareholders were scheduled to vote on the deal. While the proposal had garnered quite a bit of flak, especially in Canada where a group of Canadian banks bonded together to make a counter-offer, most analysts I had spoken to on the subject expected the deal to go through with very few problems. (more…)
The trading world seems to be both expanding and contracting with the back-to-back announcements of two exchange group mergers. First is the London Stock Exchange (LSE) merging with the TMX Group, owner of the Toronto and Montreal exchanges. The combined market capitalization would be almost $7 billion. Next, the NYSE/Euronext and Deutsche Börse (DB), whose boards voted to merge on Feb. 15. That exchange could have a market capitalization of $24 billion. Derivative volume wise, it would mean about 5 billion contracts traded yearly, forming for the most part a single derivatives exchange in Europe. (See “Mega exchange on horizon?“) (more…)
The recent merger announcements from the London Stock Exchange and Toronto Exchange Group (TMX), and Deutsche Börse and NYSE Euronext brought a surge of speculation and potential merger stories to the forefront of business wires.
Who will merge next? Who will offer a competitive bid? I guess it is inevitable but there is something annoying about seeing the business press simply speculating on potential deals once these mergers get in the public consciousness.
Ever since the Chicago Mercantile Exchange’s (CME) initial public offering in 2002 —if not before — the writing was on the wall in terms of the direction of member-based financial exchanges.
Exchanges were looking to demutualize and access the capital markets by going public. And the Chicago Board Options Exchange (CBOE) being the preeminent U.S. based options exchange, with a hungry and innovative challenger in the International Securities Exchange (ISE) hot on its heels, was no different. However, CBOE had a legacy to overcome.
Now it’s crunch time in Stockholm: Sweden’s Financial Supervisory Authority (FSA) is examining Borsa Dubai’s $4 billion cash “bid” for OMX, the Swedish-Finnish exchange that has operations across Scandinavia and the Balkans. OMX management wants to be taken over by Nasdaq for $3.7 billion in shares, but shareholders may find the rival cash offer more to their liking.
The unfolding drama will be fascinating to watch, for a variety of reasons.
It’s not clear whether the Dubai offer is officially a bid – a statement issued last week seems to indicate it becomes an official bid once they get 25% of OMX shares, and they’re nowhere near that in outright ownership – but do own options putting them over the limit. Even the FSA isn’t sure whether last week’s announcement constitutes an official bid, but the intent is clear.
Leading Dubai’s charge is Per Larsson, a respected former head of OM who was squeezed out when OM merged with Helsinki’s Hex to form OMX.
Leading Nasdaq’s charge is Bob Griefeld, who has OMX management and Swedish politicians on his side. He also appears to have the backing of Sweden’s Wallenberg family and Swedish bank Nordea, according to the FT.
When Larsson was tossed, it was made easy because staid OM shareholders objected to his healthy compensation package – a package many in the industry feel was well-deserved, given his ability to develop innovative products in the previous decade.
But he’d been also held accountable for OM’s failed hostile takeover of the London Stock Exchange (LSE) in the late 1990s, and the LSE plays a central role in this drama as well: Nasdaq is abandoning its own failed bid for that platform to go after OMX, and the resulting entity would form a direct competitor to the LSE – while also sharing ownership of London’s EDX platform.
Any thoughts on the following: will the Swedish government block an offer from Dubai? Will OMX shareholders go for the cash? Is Larsson on a mission to rectify past slights? And what value would a Scandinavian-Arabian entity have over other competitors?
Intercontinental Exchange (ICE) shares rallied to $172.45 today, making the value of its offer for the Chicago Board of Trade $12.9 billion. Based on the most recent share price of the Chicago Mercantile Exchange…
Oh forget it!
Since ICE made its competing bid for the CBOT, chart watching has become a mild obsession and now that the CBOT and CME shareholders have approved their definitive merger agreement, I find myself in need of a fix. I am sure there will soon be new merger and acquisition proposals to follow as the New York Mercantile Exchange may be looking for a partner, ICE becomes a target and U.S. based options exchanges may begin to find partners.
The lack of tension at the Union League was palpable this afternoon, as Chicago Board of Trade (CBOT) members and shareholders gathered to vote on the proposed merger with the Chicago Mercantile Exchange and a round of informal interviews found not single vote against the proposed CME/CBOT merger.
“Preliminary indications are that this thing is going to pass overwhelmingly,” said Charlie Carey, CBOT Chairman.
While a vote tally isn’t yet available, CME spokespeople publicly declared victory to the press. The CME increased its bid on Friday morning, offering a stock swap ratio of .375 CME shares for each CBOT share, up from .35.
“I think it’s a fair deal, that’s what people were waiting for. It didn’t become a fair deal until Friday morning. All anybody really wanted was for it to be fair,” said independent trader Terry Donegan.
In a statement to the press, Jeffrey C. Sprecher, chairman and chief executive officer of the Intercontinental Exchange Inc. said, “Despite our disappointment in the outcome, our proposal has brought many benefits for both CBOT and ICE stockholders. For CBOT stockholders, ICE’s involvement has created nearly $3 billion in additional value through our willingness to recognize the true worth of your company.”
After large stock holders of the Chicago Board of Trade (CBOT) weighed in with their opinions the last month, it seems the vote for or against a “merger” with the Chicago Mercantile Exchange (CME) is coming down to the wire, just like a good old fashion Chicago election. A couple weeks ago, while one of the largest shareholders of CBOT stock, Caledonia Investment Pty. Ltd. of Australia, publicly stated it voted against the merger, another investor, Vernalis Group, whose funds have over $7.5 million of CBOT shares, urged the CBOT board not to make any decision on a merger now. “You should feel no sense of urgency to complete a deal right now. The pressure to merge with BOT should be with CME and ICE management alone. We should be patient and allow time for our full, true value to surface,” said Vernalis Group Managing Partner Chris Doll in a letter to CBOT Chairman Charlie Carey on June 11. Then came an announcement that the Instituional Shareholder Services (which isn’t a shareholder) recommended for the merger with the CME. It’s no wonder why CBOT members still are unsure how to vote and the decision, to come July 9, is up in the air.
Then on July 3, only days after the Intercontinental Exchange (ICE) sponsored a swanky cocktail party at Grant Park in Chicago held for CBOT members to urge them to vote no to the CME proposal, ICE gave members until 5 p.m. on July 12 to vote for its current proposal. This would be only days after the July 9 CME vote, if indeed it’s voted down. The CME, which held its own member cocktail party, countered with blunt language: “ICE continues to try to play the role of a spoiler in the CME CBOT merger agreement and has offered nothing new to its proposal. Having been rejected by CBOT’s board not once but twice, ICE has yet to address the fundamental strategic and operationa flaws in its proposed transaction….”
Most likely the back and forth is falling on deaf ears. Chances are most CBOT members have left town for the July 4th holiday, hoping to watch fireworks from a lawn chair with a brew in one hand and a hot dog in the other. July 9th will come soon enough, and right now, CME is seen as the winner by a squeaker. Despite his higher bid, ICE CEO Jeff Sprecher may learn the hard way that he may be from the Midwest, but he’s not from Chicago.
As I opened up my Chicago Sun Times today I noticed the full page ad by the Intercontinental Exchange (ICE) exclaiming to Chicago Board of Trade (CBOT) members, “DON’T BE SOLD SHORT.”
The ad in the sports section opposite the Chicago Cubs and White Sox box score, listed reasons why the ICE proposal to the CBOT was superior to the definitive agreement the CBOT’s board of directors reached with the Chicago Mercantile Exchange (CME). At the top of list was the $22.72 per share premium in the ICE offer as of Friday’s close. That premium grew to $26.14 after Monday’s close though it doesn’t include the $9.14 per share dividend to be paid to CBOT members as part of the CME’s most recent enhanced offer (though it is technically being paid by the CBOT). It goes on to tout the agreement reached with the Chicago Board Options Exchange (CBOE) over the Exercise Right Privilege (ERP), ICE’s fast growing stock and ICE’s ability to scale its technology to meet the needs of CBOT customers.
Not to be outdone the CME placed its own ad urging CBOT members to vote “YES” for the merger at the July 9 meeting. The CME cites the long-term potential, growth opportunities and a greater ability to integrate the CBOT and CME among other reason to go with the CME.
Later in the afternoon the CME put out a press release citing several analysts who have pointed out that ICE’s stock has had a tendency to improve when it seemed less likely they would win the battle for the CBOT. The implication being that ICE stock would drop precipitously if and when an ICE/CBOT deal is struck.
It is an interesting tactic because CME confirmed Monday was most likely the last day they could improve their offer to the CBOT without delaying the July 9 vote. As of the close of business there was no enhanced CME offer so it appears the two exchanges are prepared to go into the vote with their current offers.
This obviously can change as the vote has been delayed before.
