It was a standing-room-only crowd today as shareholders in the Chicago Board of Trade (CBOT) gathered to hear executives from the Chicago Mercantile Exchange (CME) explain the advantages of a CME/CBOT merger over a proposed merger between the CBOT and the IntercontinentalExchange (ICE).
The thorough and detailed presentation included a comparison/contrast of CME and ICE technology and a recounting of the CME’s history of integrating trade execution and clearing, but at the end of the day, the CBOT member response was simply, ‘show me the money.’
“The landscape has changed,” said one attendee, adding that today’s presentation will “open the door to a reexamination of this deal.”
Craig Donohue, CME CEO responded, “This is a tough conversation to have with an instant-price discovery crowd.”
CME executives clearly were not going to be drawn into a negotiation for the exchange today, nor did they encourage hope for a more robust counter offer, repeatedly referring to the October bid as the “definitive agreement.”
Pat Arbor, former CBOT chairman, said that while the CBOT members remain amenable to a deal with the CME, he expressed doubt that the membership would accept the merger at its current pricing and expects revisions to the deal.
The thrust of the argument in favor of a merger with the CME is that the CME is a stronger organization based on a wider product offering, stronger technology and a history of successful integrations.
Terry Duffy, CME chairman, argued that the CME is the stronger potential partner based on the “flawless integration” of the CME and CBOT clearing operations in the Common Clearing Link and successful integration of trade execution for the New York Mercantile Exchange. In addition, he says that the $240 million in synergies claimed by the ICE are suspect. “In fact, we believe a realistic range for the synergies is in the $60 million to $105 million range. Failure to achieve ICE’s inflated estimates would adversely affect the value of CBOT shareholders in any combined ICE/CBOT company.”
The presentation and audio are available here.
ICE proposal moves forward: An interview with Jeff Sprecher
CBOT proposed acquisition resources
