CME Group in talks to buy Nymex

Chicago-based CME Group is in preliminary discussions aimed at acquiring the New York Mercantile Exchange (Nymex), the two firms announced on January 28.

A merger with Nymex would bolster CME Group’s position as the world’s largest exchange group and give it a foothold in energy trading. CME Group was formed by the merger of the Chicago Board of Trade (CBOT) and the Chicago Mercantile Exchange (CME) in July 2007.

In a statement, CME Group and Nymex said they have made the talks public in response to market speculation. A 30-day exclusive negotiating period has been entered into by the two companies, which runs until February 27. The terms being discussed would see Nymex shareholders receiving $36 in cash and 0.132 of a share of CME Group’s common stock.

The two firms expect to retain a trading floor in New York City, according to the statement. Present proposals would also entail Nymex’s 816 memberships being repurchased at a total price below $500 million.

The announcement came on the same day CME Group declared it had completed moving CBOT contracts onto its Globex electronic trading platform. The transfer does not include CBOT’s metals products, however, which have been left on the eCBOT platform for the time being. Competing Nymex contracts have been listed on Globex under an agreement struck between it and the CME since June 2006.

In December, CME Group’s Chicago-based chief executive, Craig Donohue, said the exchange was working on a resolution to the problem.

In an exclusive interview with Risk, Donohue also gave his views on exchange consolidation. “Exchanges that tend to be narrow in their product lines are looking for opportunities to become part of a larger organisation, where they have a better basis for competing,” he said. Nymex’s product offering is limited to energy and metals.

On January 23, CME Group and the Brazilian Mercantile & Futures Exchange completed an agreement to take cross-equity holdings in each other, involving CME Group taking a 10% stake in the Latin American bourse.

Earlier in the month, contracts both of the Kansas City Board of Trade and the Minneapolis Grain Exchange also began trading on the group’s Globex platform. In both electronic and open-outcry trading, it saw almost 2.8 billion contracts traded during 2007.

See also:
Donohue: further exchange consolidation ahead
CME seals deal with CBOT
CME offers CBOT shareholders “best and final offer”
CME raises bid for CBOT after lawsuit threat
Regulators clear CME-CBOT merger