With its stock plummeting and Nymex members threatening to vote no on the CME Group agreement to buy Nymex, CME Group has initiated a $1.1 billion share buyback program, which will run for up to 18 months and operate in the open market, a tender offer or privately negotiated transactions. CME also intends to declare a $5 per share special dividend following the acquisition of Nymex.
“With the completion of the merger with [the Chicago Board of Trade] and the pending acquisition of Nymex, our need to significantly build cash balances has changed,” said Craig Donohue, CME Group CEO in a press statement. “Today’s initiatives positively address the interests of our shareholders, while allowing us to
successfully complete our pending acquisition of Nymex in a highly disciplined fashion.”
But with CME Group stock trading down to $300 per share in mid-July, Nymex members, already skeptical of the strangle-free equity swap deal, have, if possible, cooled further on the offer.
“The way the two stocks have been so beat up, there’s probably going to have to be a big shift in the deal, not necessarily just a post closing dividend,” says John Vassallo, president of Coquest Inc. and a Nymex member. “If they keep selling off, it’s going to get more difficult.”
Eric Bolling, Nymex member and independent trader, says that while he liked the deal at $9 billion, at $7 billion, he is “not loving it,” and that the stock buy back will have little effect.
According to CME Group CFO Jamie Parisi, the exchange will incur as much as $4 billion in debt initially to buy back the shares and acquire Nymex. “We are balancing the shareholder benefits of incurring some debt with the critical role CME Group plays in global capital markets.”
In a separate move, CME Group’s board of directors approved the decision to single list its common stock on The Nasdaq Global Select.
CME and Nasdaq also extended an exclusive agreement to list futures and options on futures contracts based on Nasdaq indexes for seven years, through 2019. The exclusive agreement dates to 1996, and Nasdaq-related futures and options contracts on CME trade an average daily volume of 490,000.
