The New York Times-20080129-Commodities Markets in New York and Chicago Discuss Merger
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Commodities Markets in New York and Chicago Discuss Merger
Full Text (474 words)The CME Group, which owns the Chicago Mercantile Exchange, and Nymex Holdings, the owner of the New York Mercantile Exchange, said Monday that they were in talks about an $11 billion merger.
A union of the commodities markets, the largest in the United States, would be the latest combination in a wave of consolidation among financial markets. It would give CME, the world's largest market for derivatives trading, a major presence in energy trading.
It may also lead to a flurry of rival bids for Nymex, whose longtime lead in energy and metals dealing has been challenged by newer rivals.
In the last two years, stock exchanges have competed to build economies of scale by striking deals at home and abroad. Nearly $53 billion in exchange-related mergers have taken place since 2006, according to data from Dealogic. CME itself is the product of an $11.7 billion merger in July of the Chicago Mercantile Exchange and the Chicago Board of Trade.
In what the two commodities markets said was a 30-day exclusive negotiating period, they are discussing a takeover of Nymex by CME. The Chicago exchange would pay $36 in cash and 0.1323 share for each Nymex share, or about $119.22 based on Friday's closing price. That is an 11 percent premium over the Nymex closing share price of $107.16 on Friday.
Shares in Nymex rose $9.34 on Monday, or 8.7 percent, closing at $116.50. CME declined $4, to $625.
CME would keep Nymex's trading floors in Lower Manhattan. It might also buy back Nymex's 816 memberships for a maximum of $500 million.
Both exchanges said that the discussions were in an early stage and that any final deal might differ from those terms.
Nymex executives have long been open to a deal. The exchange's chairman, Richard Schaeffer, said last year that it was talking with potential suitors. Last month, Mr. Schaeffer said it was not in negotiations with NYSE Euronext, parent company of the New York Stock Exchange.
But that left open the possibility of talks with rivals like CME. The two companies would be a natural fit. In 2006, Nymex struck a deal to list its energy futures and options contracts on CME's Globex electronic exchange, rather than on its own smaller system.
One challenge facing older markets like the Chicago Merc and Nymex has been increased competition from rivals offering more electronic trading, rather than the familiar open-outcry system of specialists shouting orders.
Among these is the Intercontinental Exchange, an Atlanta-based concern that bought the New York Board of Trade last year. The Intercontinental Exchange lost to the Merc for the Chicago Board of Trade, and some analysts speculate that it may bid for Nymex as well.
[Illustration]PHOTO: CME, owner of the Chicago Mercantile Exchange, above, seeks to buy Nymex, which owns the New York Mercantile Exchange. (PHOTOGRAPH BY TIM BOYLE/BLOOMBERG NEWS)