The 16% bid increase was made in an effort to defeat the higher, unsolicited rival bid from Atlanta-based Intercontinental Exchange (ICE) made in March.
Under the newly revised terms of the merger agreement struck between the Chicago bourses in October, Cbot shareholders would receive 0.35 CME shares for each of their shares, a 16 per cent increase over the earlier offer. This means that Cbot shareholders would essentially own 34.6 per cent of the combined entity, up from 31.2 per cent previously.
The sweetener for Cbot shareholders, however, is CME’s offer to buy back $3.5 billion worth of its own stock after the merger closes, at $560 a share – a 12% premium to recent trading prices, enabling the return of cash to shareholders.
The revised deal is particularly timely considering CME’s declining share price had also pushed the value of its original bid 30 per cent below the offer from ICE. Cbot shareholders were considering a rejection of both CME’s and ICE’s offers, arguing that the successful launch of side-by-side electronic trading of agricultural futures last August had strengthened the exchange to a point where it could justifiably remain independent.
Today’s development is thought to have returned initiative to the CME, despite its offer still being lower than that of ICE. The revised deal values the Cbot at $9.2bn, compared to its original offer of $7.9 billion in October. ICE’s offer is worth around $10.1bn.
Nevertheless, shareholders of the Cbot are widely thought to favour the idea of a better offer from their Chicago rival instead of accepting the ICE bid. “We believe there is strong support for the combination from shareholders and members of both companies,” said CME chairman Terry Duffy. “These revised terms and the cash tender offer makes our already compelling transaction even more attractive.”
ICE today issued a statement in response to the announcement, saying that it was “reviewing this morning’s announcement and evaluating our options. ICE continues to believe the combination of Cbot and ICE offers Cbot shareholders and members greater immediate and long-term value as well as better growth prospects than its acquisition by CME.”
A Cbot shareholder approval vote is scheduled for July 9.
The week on Risk.net, July 7-13, 2018Receive this by email