One financial investor in the Chicago Board of Trade (CBOT) is saying publicly in a letter to CBOT Chairman Charlie Carey and president and CEO Bernie Dan that the terms of the Chicago Mercantile Exchange’s (CME) offer to merge with the CBOT are not good enough.
“The CBOT is only merging with the CME because everyone else is merging and it does not want to get left out, and that in of itself, is not a good reason,” says Chris Doll, managing partner at The Vernalis Group LLC, the managing partner of Amphora Fund LLP, which has invested more than 18% of its portfolio in the CBOT.
“As a long-term oriented shareholder, we are very interested in the unlocked value that still exists at the [CBOT],” Doll says in his letter dated June 11. “If there is still potential for value creation as an independent entity, and if the financial markets have yet to fully value this potential, then why should shareholders vote ‘YES’ to merge with any partner at this time,” he asks?
Doll sees possibilities for the CBOT to increase their value at the bargaining table if only they wait a bit longer. It had been less than a year from when the CBOT went public to when it considered the merger with the CME and it did not allow itself enough time to grow. For example, the agricultural contracts just went electronic last August and while it has been a success it can become even more successful. Also the pricing increases stemming from the CBOT fighting off competition from Eurex US have not been allowed to take full effect.
He adds that he does want to see the CBOT merge with the CME, but only if the CME offers a deal that better reflects the future potential value of the CBOT.