Nybot in Nymex sights, but IPE rumours are put on ice

Nymex is rumoured to be interested in acquiring Ice. Here, in an exclusive interviewwith Energy Risk, Nymex president Bo Collins suggests the exchange may also besetting its sights elsewhere. By James Ockenden

The New York Mercantile Exchange (Nymex) may buy the New York Board of Trade (Nybot) as part of its expansion and acquisition drive, according to Nymex president Bo Collins.

The energy and metals exchange is planning an aggressive acquisition campaign, capitalising on the trend for consolidation in the exchange business and looking to diversify its business. While Collins said any acquisition plans were still “premature”, he highlighted cotton, coffee, cocoa and sugar exchange Nybot as a prime candidate.

“ We may have the opportunity to acquire Nybot, which we would be very open to. It’s a great way to diversify our products. We can consolidate some operatingexpenses and continue to add to our branding,” said Collins.

Diversification
Talking of consolidation in the exchange business, Collins said Nymex “intended to very aggressively extend that pattern of development”, and said that “there are going to be acquisitions that benefit and expand, and even diversify our business”.

Following the publication of these comments on Energy Risk’s website last month, various news services, including Reuters and the New York Post, picked up on the story. On February 10 Nybot released a statement from its president and chief executive Charles Falk. “There have been no discussions between Nybot and the New York Mercantile Exchange concerning a possible merger of the two exchanges,” Falk said in the statement. “We are in favour of anything that would enhance Nybot, our members, and our customers. However, no merger proposals have been made by either exchange.” Nymex has not issued a statement regarding the possible merger. Collins, did, however, dismiss rumours of Nymex making an imminent play for the London-based International Petroleum Exchange (IPE), owned by Atlanta-based Intercontinental Exchange (Ice).

Nymex has been widely reported as developing a hostile takeover plan for the IPE and has been accused of visiting its shareholders to discuss such plans without talking to the IPE itself.

The IPE’s chief executive Richard Ward said: “If Nymex is serious [about a deal with the IPE] it needs to do something other than going round and seeing our shareholders and fuelling these rumours.”

But according to Collins, the recent Nymex visits to shareholders were part of everyday customer relationship building. “We had been very focused internally on changes we’ve made to our organisation technologically. I had not been personally engaged for a while, talking to our customers and hearing the view from the trenches.” Collins added: “I have the highest respect for Richard [Ward], but he’s not a customer of mine.”

The IPE issue has been no more than
“ a casual conversation” with the Nymex customers who own shares in IPE, according to Collins. “The devil is in the details – and we did not discuss [IPE] details [with these shareholders],” he said.

Nevertheless, most industry participants, including Nymex and the IPE, agree an acquisition would be beneficial, both for the industry and for the IPE shareholders. The IPE’s Ward says he can see great benefits for companies being able to put their business into one clearing organisation and enjoying offset margins as a result.

And one senior London-based broker said: “Ice is desperate to find some route out, to get an exit from its IPE acquisition.” Ice acquired the IPE in July 2001 through a stock swap – at the time, Ice was valued at$1.3 billion and the IPE $130 million.

Dubai
Meanwhile, Nymex signed a memorandum of understanding with the Dubai Development and Investment Authority (DDIA) last month, to develop a commodities exchange in Dubai. The two sides will now conduct a feasibility study for three to four months before deciding on the type of products to list on the proposed exchange, Collins said.

Expected listings include crude oil, oil products and metals, but Collins would not reveal Nymex’s plans. Collins also refused to divulge the costs involved in building the exchange, except to say that Nymex’s personnel and financial commitment would be “considerable”.

Nymex is also the recipient of Energy Risk’s 2004 Exchange of The Yearand Innovation of the Year awards (see p15).