Chicago Merc Now Loves Chicago Board of Trade 16% More

Posted by John Carney, May 11, 2007, 9:16am

The Chicago Mercantile Exchange “sweetened” its bid for the Chicago Board of Trade this morning.* The new offer would exchange each CBOT share for a 0.35 share of the CME, which adds up to a 16% increase from the original merger agreement. The CME is also promising a buyback of its own shares after the deal is done, lessening the dilutive effect of the acquisition on those shares. The new offer puts a value on the Board of Trade at somewhere around $9.2 billion.

This pushes the ball into Intercontinental Exchange Inc, which made a $10.1 billion in March. The Board of Trade rejected the offer as “not superior” to the offer already on the table. Not surprisingly, the new offer from the Merc makes the offer from ICE even more “not superior” than it was before in the view of Board of Trade directors. Everyone now wonders whether ICE can come back with an even better offer.

*Everyone keeps saying the bid was "sweetened." We assume that this is very funny if you trade commodities or something. Is it a maple syrup futures joke? We don't get it. When News Corp offers more for the Dow will that also be "sweeter" or just more money?


Chicago Merc Press Release [CME]
CME Raises Bid for CBOT To Fend Off Rival Offer [Wall Street Journal]
Chicago Merc Agrees to Pay More for Board of Trade [Bloomberg]

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Posted in: Exchanges, M&A

Comments

Posted by D Trader Writ Large, May 11, 2007 10:04AM

If the Merc gets the Board, all us D traders are fucked. Expect fees to go through the roof. These guys are playing monopoly, and they are getting ready to put up hotels on Park Place and Boardwalk.

Posted by , May 11, 2007 10:22AM

Everyone knows you win monopoly by getting hotels on Baltic and Mediterranean

Posted by , May 11, 2007 11:24AM

Disagree with D Trader - Liquidity is driven by rates - the cutting of rates might stop, but no reason to think they will attempt to raise them - they make more with lower rates.

Posted by BSD, May 11, 2007 11:41AM

First and foremost, when anyone refers to an offer or bid being "sweetened" it's obvious to all of us non state school dropouts that it means the offer was increased. Used all the time.
Secondly, you win monopoly by developing the hot corner (oranges and reds).
Thirdly, I am such a huge douche bag I even surprise myself sometimes.

Posted by John Carney, May 11, 2007 12:02PM

BSD,

Two things. First, we know what sweetened means. It's just funny how that is the buzz word everyone is using for this particular story. Acquire sense of humor, please.

Second, you are absolutely right about monopoly. Oranges and reds all the way. But don't tell everyone that. It makes it harder to win when everyone understands the Big Blues are a sucker bet.

Posted by , May 11, 2007 12:17PM

I am a fan of the light blues myself. Cheap and easy, just the way I like it :)

Posted by Anonymous, May 11, 2007 1:03PM

Yes, BSD is sometimes a huge douche bag. But no, it's not surprising.

Posted by Anonymous, May 11, 2007 1:21PM

It's not really true that Park Place and Boardwalk are sucker bets while Orange and Red are winners. It IS true that, probabilistically, the Orange and Reds are the most frequently visited streets. But the thing that matters is the expected value of the property. I don't have the calculations, but I suspect that Park Place and Boardwalk are a better deal than what you guys suggest. The Big Blues are like a far out-of-the-money option; they can bankcrupt an opponent on a single turn. It is also easier to build on the Big Blues because the block only consists of two properties (as opposed to the usual three).

Posted by BSD, May 11, 2007 1:37PM

For the record the BSD above is not me, and in all likelihood is an inbred trustfund Duke grad. I got the sweetened joke, John (not that it was very funny).

Posted by Christopher, May 11, 2007 4:03PM

I'm with you on the cliche. Just for once (or maybe a couple of times) I'd like to read that an offer was "embittered." It makes as much sense, after all. The higher bid is sweeter to the sellers but more bitter for the buyers.

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