In what could be a vote of confidence for the carbon markets, on April 30, the Intercontinental Exchange (ICE) reached an agreement with Climate Exchange Plc (CLE) to acquire the emissions market-trading giant. ICE had acquired a 4.8% stake in the Climate Exchange in June 2009 and already had contracts in place with the Climate Exchange to provide technology and clearing services. The acquisition is expected to close at the end of July 2010. Climate Exchange operates the European Climate Exchange, the Chicago Climate Exchange and the Chicago Climate Futures Exchange.
“Climate derivatives have a bright future,” says Paul Rowady, senior analyst at Tabb Group. “There’s a lot of regulatory dust in the air about how we’re going to price carbon that’s going to have an impact on the future of climate-based securities, so it’s a little bit risky to be making an investment like [this]. It’s a good thing for the Climate Exchange because it gives them a bigger platform and deeper pockets to grow that piece of the business.”
Under the agreement, CLE shareholders would receive £7.5 ($11.26) for each share of CLE at the closing of the scheme (sale), valuing CLE at £395 (approximately $593 million). According to a release, the acquisition represents a premium of 56.9% from the April 29 closing price of CLE.
The deal expands the competition between ICE and CME Group, which is part of the Green Exchange joint venture. The Green Exchange trades on the CME Globex and Clearport platforms and clears through CME Group's clearinghouse.
In a statement, Climate Exchange Chairman Richard Sandor said, “We believe that a combination with ICE makes strategic sense and look forward to addressing continued opportunities together.”