NYSE COO says $5 billion too much for CBOE

COO of NYSE Euronext Lawrence Leibowitz speaks at the Reuters Exchanges and Trading Summit in New York March 29, 2010.

NEW YORK (Reuters) - NYSE Euronext (NYX.N) will not say whether it wants to buy CBOE Holdings Inc, but it is unlikely to pay the $5 billion or so that rival CME Group Inc (CME.O) was reportedly weighing last year, a top executive said on Monday.

The Chicago Board Options Exchange is planning a $300 million public offering in a long-awaited move that could allow the biggest U.S. options exchange to expand or be acquired.

NYSE Euronext, a transatlantic exchange operator, is not likely to compete with CME over the options exchange, which has the capacity to pay more and has little product overlap, Chief Operating Officer Larry Leibowitz said at the Reuters Global Exchanges and Trading Summit in New York.

"CBOE obviously has a lot of value to it. They have some interesting products. So you never rule it out but it would have to be at the right price," Leibowitz said. "Certainly at the prices that were being thrown around a year ago, that would be a very difficult transaction for us."

CBOE has been valued at anywhere between $2.5 billion and $5 billion, with a media report saying last October that CME was in talks for a deal that would value the company at up to $5 billion.

As an active acquirer over the last few years, NYSE Euronext is often approached about opportunities for deals, Leibowitz said.

"So it's clear that people normally will knock on our door if something is for sale. We won't miss a lot of trades, because that's how sellers work," Leibowitz said.

NYSE Euronext, which already has its own operations in the area, would have to balance its strategic need and cost, should it look at buying the business, he said.

"So it's got to be value at a price at the right time that fits our strategy," Leibowitz said. "Part of what you have to figure out is, is it adding enough to what you have done? Is 1 and 1 really going to be 2-1/2 or is it going to be 1-1/2?"

A deal for CBOE is also likely to be complicated because of its member-owned structure, Leibowitz said.

CBOE has tried for years to convert from a member-owned structure to a share-based company, but was stymied by a long-running legal tussle over ownership rights with CME-owned Chicago Board of Trade.

The conversion to a share-based company -- known as demutualization -- requires approval of CBOE's 930 members, many of whom earn lucrative incomes from leasing their memberships to traders, who use the memberships for access to the exchange.

When the exchange demutualizes, memberships will be abolished, and the exchange will start collecting access fees directly.

Leibowitz said it might make sense for a buyer to wait until the company has gone public.

"Buying a member-owned organization is not easy," Leibowitz said. "To some extent you are better off letting the market mark them to market and also get through the process of demutualizing, which is complex."

(Reporting by Paritosh Bansal and Ann Saphir, editing by Matthew Lewis)