CME makes “final” offer for Cbot

Yesterday, Australia-based Caledonia Investments, which holds 6.5% of Board of Trade shares, said it would not support the CME’s bid if it did not raise its offer ahead of the crucial shareholder vote on the deal, scheduled for Monday.

Under the new terms announced today, CME has increased the exchange ratio from 0.350 to 0.375 shares of CME Holdings common stock for each share of CBOT Holdings common stock. This reduces the gap between its bid and that of Atlanta-based Intercontinental Exchange from $800m to $100m based on Thursday’s closing prices.

"Following completion of the transaction, current CBOT shareholders will own approximately 36% of the outstanding shares of the combined company, up from approximately 35% in the existing agreement," the companies said in a press release. They said all other terms of the deal remain the same.

CME said Friday's terms represent its "best and final" offer.

The outcome of the bidding war is being closely followed, with the winning bid set to redefine the derivatives landscape and the loser expected to pursue a different merger elsewhere.

Cbot shareholders are known to favour a combination with their cross town rival.

The CME claims that its new offer is now equal to the face value of ICE’s hostile bid because it carries fewer execution risks and more growth opportunities. Yet ICE previously brokered a deal with the Chicago Board Options Exchange to end a long running dispute over CBOT members’ potential share in a flotation of the options business, a move which the CME has only partially addressed.

Earlier this week Cbot accused the Cboe of making a "unilateral attempt" to extinguish trading rights for its members following the Cboe’s move to grant only "interim" trading rights to full members of Cbot should a merger between Cbot and Chicago Mercantile Exchange Holdings be approved next week. Cboe, the largest US options exchange, has been attempting to end the historic right held by some Board of Trade members to also trade options at Cboe, known as the exercise right.

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