CME One-Ups ICE In CBOT Bidding By Gaining Regulatory Approval

Clearing perhaps the biggest hurdle in its attempt to win a bidding war for the Chicago Board of Trade [CBOT], the Chicago Mercantile Exchange [CME] was given clearance by the Justice Department [DoJ] to proceed with its acquisition attempt. The DoJ believes CME and CBOT's products "seldom compete head to head" and that the merger would not impede innovation in the areas of exchange-traded futures and options on U.S. interest rates, equity indexes and foreign currencies. The approval should give CME another leg up on IntercontinentalExchange's [ICE] higher bid. CBOT's board already prefers CME's offer to ICE's due to the belief it would be a smoother transition. The regulatory approval only seems to confirm that. According to Craig Pirrong, Director of energy markets for the University's Global Energy Management Institute, "This was realistically the main obstacle. The ICE deal will melt away." On May 11, CME raised its bid to 0.35 of its own shares for each CBOT share for a total offer of $10.3 billion at current market prices. Shares of all three companies reacted positively to the news yesterday, gaining a minimum of 1.3%, with ICE shares jumping nearly 2.5% as shareholders seemed to breathe a sigh of relief that the company's offer would not go through as planned.

Sources: Press Release, Bloomberg, Wall Street Journal, The Street.com, MarketWatch, Reuters
Commentary: CME Sweetens Offer for CBOT; ICE Considers Its Position • Who Will Acquire CBOT Holdings? • Chicago Merc-ICE Bidding War Over CBOT Gets Nasty
Stocks/ETFs to watch: CBOT Holdings, Inc. (BOT), Chicago Mercantile Exchange Holdings Inc. (CME), IntercontinentalExchange, Inc. (ICE). Competitors: NYSE Euronext (NYX), NYMEX Holdings Inc. (NMX), International Securities Exchange Inc. (ISE)

Seeking Alpha's news briefs are combined into a pre-market summary called Wall Street Breakfast. Get Wall Street Breakfast by email -- it's free and takes only seconds to sign up.