CME offers CBOT shareholders “best and final offer”

The Chicago Mercantile Exchange (CME) has upped its bid for cross-town competitor the Chicago Board of Trade (CBOT) for the third and “final” time, ahead of a shareholder vote on July 9.

The revised offer means CBOT shareholders will receive 0.375 shares of CME common stock for every CBOT share, an increase of 0.025. The CME and CBOT said CBOT shareholders would now control about 36% of the combined company, as opposed to 35%.

The tie-up already has regulatory quiescence and the new offer has been approved by both firms' boards. CME and CBOT shareholders will vote separately on the merger proposals on Monday.

“This was a step [the CME] had to take,” said Patrick O’Shaughnessy, Chicago-based exchanges analyst at investment firm Morningstar. “The CME and CBOT spent a lot of time talking to the members of CBOT and were not comfortable that the previous bid would be voted for next Monday. The CME has too much at stake to lose that vote.”

The Atlanta-based Intercontinental Exchange (Ice) has also been courting CBOT shareholders with rival takeover offers. Although O’Shaughnessy said votes of CME and CBOT shareholders were likely to approve the deal, he noted that Ice remained a “wildcard”. Ice and the CME have both released vitriolic statements deriding their opposing bids over the past few weeks.

However, the CME’s latest attempt to secure the merger deal has won over CBOT’s largest shareholder. Sydney-based investment group Caledonia Investments announced today it supported the merger proposal and would encourage all other shareholders to vote for it.

Apart from the ratio at which shares in the new company are to be issued, all other parts of the merger package remain the same. In total, it values the CBOT at roughly $11 billion. The consolidated Chicago Mercantile Exchange Group would be the world's largest derivatives exchange.