Intercontinental Exchange Confirms Rival CBOT Offer Over CME Offer

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There is now confirmation from the Intercontinental Exchange (ICE-NYSE) that it is indeed making a rival Offer for the Chicago Board of Trade (BOT-NYSE).  CNBC’s David Faber first reported that the Intercontinental Exchange (ICE-NYSE) is making a rival offer of 1.42 shares for the CBOT (BOT-NYSE), which comes to $187.34 based on yesterday’s close; this is more than 10% premium to the Chicago Mercantile Exchange (CME-NYSE) pending merger with the CBOT.  That is the exchange ratio.  A shareholder vote for CME/CBOT is scheduled in April.  ICE sees no anti-trust risks and ICE would move its HQ from Atlanta to Chicago and CBOT would own 51.5% of the combined company.  Stay tuned, because this one will get complicated.  The CME & CBOT were already in the process of integration so this one can have some profound implications for both Chicago exchanges if the CME doesn’t come back with a higher bid.  The full press release from ICE can be found here at this web site.  Here are the basic guts in summary:

• ICE would issue 1.42 ICE shares for each CBOT Class A common share, valued at $187.34 per CBOT share based on yesterday’s closing price of ICE shares. This represents a 12.8% premium to CBOT’s current share price, and a 39.3% premium to its share price on October 16, 2006, the day before announcement of its merger agreement with the Chicago Mercantile Exchange (NYSE:CME). The $187.34 per share value also represents a premium of 10.5% to the current value of the pending CME/CBOT transaction to CBOT shareholders.
• CBOT shareholders would own approximately 51.5% of the combined company and, in addition to receiving a premium, would participate in the significant strategic and financial benefits of the combination.
• ICE is committed to preserving the heritage of CBOT, bringing its brand and expertise forward on a global scale as the derivatives marketplace expands.
• ICE will commit to the same terms as the CME offer regarding CBOT’s open auction markets and will protect and grow the CBOT metals complex.
• ICE proposes to enter into a transaction on terms similar to those in the current CBOT merger agreement with CME. Flexibility in the potential legal structure of the transaction exists to provide CBOT members who hold Chicago Board Options Exchange exercise rights a preferred structure to preserve these rights.
• Unlike a combination of CME and CBOT, ICE believes no significant antitrust or other regulatory risks exist in a combination of ICE and CBOT and a transaction could be completed quickly, thereby delivering both near-term and long-term benefits to all stakeholders of both ICE and CBOT.

Jon C. Ogg
March 15, 2007

Jon Ogg can be reached at jonogg@247wallst.com; he does not own securities in the companies he covers.