CBOT Favors ICE Over CME, May Stay Independent -- Papers

The Wall Street Journal reports that the Chicago Board of Trade [CBOT] is increasingly leaning towards accepting an unsolicited merger offer from Atlanta energy market IntercontinentalExchange Inc. [ICE] and dropping its previously accepted deal with cross-town rival Chicago Mercantile Exchange Holdings Inc. [CME]. Conversely, the Financial Times reports that the CBOT is under growing shareholder pressure to ditch both bids and either remain independent or wait for something more appealing. Fueling the speculation on both fronts is the fact that CME shares are down 6.1% since ICE's March 15 offer while ICE shares have gained 2.2% over the same period. As a result, ICE's all-stock bid is now worth $2.6 billion [33%] more than the CME's approximately $8 billion offer. According to a contract traded on the U.S. Futures Exchange, traders gave an ICE-CBOT deal a 51% chance of happening by early December, vs. 45% for the CME; three weeks ago the odds were 70-30 in favor of the CME. The Journal says that should ICE win, the CME may look to merge with the New York Mercantile Exchange [Nymex]. Asked about the ICE premium, a CME spokeswoman said its offer is superior because they "have the clearing and technology scale to accommodate CBOT volumes." ICE admits it's smaller than the CME, but says it has a record of successful deal integration. If CBOT shareholders refuse the deal, it avoids a $240m break-up fee, but would then be barred from entertaining another bid for a full year. The Financial Times says shareholders pushing for the CBOT's independence cite the recent takeover of the International Securities Exchange [ISE] by Deutsche Börse's Eurex subsidiary. They concede shares would likely drop if both offers were rebuffed, but believe the drop would be small and easily overcome by future gains.

Sources: Wall Street Journal, Financial Times
Commentary: CBOT Members Believe CME Partnership is Right, Price is Wrong • CBOT Taking ICE Offer Seriously: Money Talks • CBOT Takeover Battle: Show The Love
Stocks/ETFs to watch: CBOT Holdings Inc. (BOT), Chicago Mercantile Exchange Holdings (CME), IntercontinentalExchange Inc. (ICE), Nymex Holdings Inc. (NMX) Competitors: International Securities Exchange Inc. (ISE), Nasdaq Stock Market Inc. (NDAQ), NYSE Euronext (NYX)

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