A pitched battle for the No 2 US futures mart rages on, with Chicago Mercantile Exchange Holdings Inc on Thursday beefing up terms of its offer for CBOT Holdings Inc for the second time in a month.
The latest steps from the largest futures mart follow an improved proposal on Tuesday from Atlanta-based energy exchange IntercontinentalExchange Inc, which has been pursuing a hostile bid for CBOT since March.
CME Chief Executive Craig Donohue told analysts that the new terms represented "the final piece" in the push toward a merger the companies announced in October. CBOT members and shareholders and CME shareholders will vote on July 9 on whether to approve the merger.
Leading Thursday's enhancements is a $9.14-per-share special dividend for CBOT shareholders - some $485 million in total or about $250,000 for each CBOT "full member."
The boards of CBOT and CME approved the new terms at special meetings early on Thursday, CBOT Chairman Charles Carey told reporters in a press briefing. Officials declined to say how long the move had been mulled. But Terry Duffy, CME's executive chairman, said "we didn't just think of this yesterday."
CME also announced a plan for exercise rights - the rights held by CBOT members to trade at the Chicago Board Options Exchange - that it termed superior to a deal reached between CBOE and ICE last month.
CBOT members will have the ability to sell their exercise rights shortly after the merger, or participate in a class action lawsuit that CBOT is conducting against the options mart and receive a guaranteed minimum value. The move is a "great response" to concerns raised by CBOT members about the future of the exercise rights, said Carey.
CBOT officials were to meet with members later on Thursday to discuss the revisions. At current share values, ICE's offer values CBOT at about $11.1 billion versus CME's $10.2 billion. ICE added cash to its stock bid on Tuesday, a day after the US Department of Justice gave regulatory clearance for CME and CBOT to meld into the world's largest derivatives exchange.
But CBOT's board said on Thursday that the ICE proposal was not superior to CME's latest terms, adding that it does not address important strategic and operational concerns.
Last week, CBOT said risks to its futures trading franchise from a partnership with ICE could be "catastrophic." "We are evaluating the latest CME proposal and continue to believe that ICE's proposal is clearly superior," an ICE spokeswoman said in an e-mailed statement.
Also on Thursday, a shareholder group that had sued the CBOT to extract more value from the proposed merger said it had settled after the addition of the latest terms. The shareholder group is led by the Louisiana Municipal Employees Retirement System (LAMPERS).
The latest enhancements mean the proposed deal "appears to be superior to the ICE proposal and fair to the public shareholders," said co-lead counsel Stuart Grant, an attorney with Grant & Eisenhofer.