The Intercontinental Exchange has made a proposal to the Board of Directors of CBOT Holdings to combine the two companies in a stock-for-stock transaction worth a reported USD9.9 billion.
The combined company would have a leading presence in the major derivatives categories, including agricultural and energy products, interest rates and metals, and would be supported by integrated clearing capabilities and state-of-the-art trading technology. The transaction would promote competition and innovation in the domestic and global derivatives markets while providing superior opportunities to leverage the complementary strengths of ICE and CBOT to drive growth, customer benefits, and shareholder value.
Based on publicly available information, ICE estimates transaction benefits of at least USD240 million annually upon the full integration of ICE and CBOT. In addition to identified expense rationalisation and the revenue growth opportunities available to the combined company, significant clearing benefits also exist as ICE could provide a fully operational clearing solution for CBOT’s products upon termination of CBOT’s existing clearing agreement with CME in January, 2009. Accordingly, ICE believes the combination would be accretive to cash earnings per share within 18 months of closing. With access to CBOT and its management, ICE expects to identify additional opportunities for the combined company.
“This is an extremely compelling combination for Chicago Board of Trade and Intercontinental Exchange shareholders, trading members, customers, clearing firms, employees, the derivatives industry and the City of Chicago,” says Jeffrey C. Sprecher, the Chairman and CEO of ICE. “The CBOT Board of Directors has the opportunity to achieve a transaction that offers a considerable premium to the pending CME transaction and, at the same time, secures the CBOT’s position as a leading independent global derivatives complex based in Chicago. The combined company would be extremely well positioned in nearly every high-growth derivatives segment, and would have the platform to capitalise on the many emerging growth opportunities in the dynamic derivatives landscape on a global scale. The transaction we are proposing is clearly superior to a combination with the CME for CBOT’s shareholders and other stakeholders.”
Since January 1, 2006, the value of ICE shares has increased 348 percent compared with growth in CBOT shares of 80.5 percent and in CME shares of 55.5 percent over the same period. ICE has successfully completed the acquisitions of International Petroleum Exchange and the New York Board of Trade, creating substantial value for the former owners of each organisation and delivering exceptional organic growth through innovation and technology.
Morgan Stanley is serving as financial advisor to ICE and Sullivan and Cromwell LLP is serving as legal advisor to ICE.