UPDATE 3-CME buy of CBOT easily approved by shareholders
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By Ros Krasny
CHICAGO, July 9 (Reuters) - Shareholders of Chicago Mercantile Exchange Holdings Inc CME.N and CBOT Holdings Inc BOT.N voted on Monday to merge the two largest U.S. futures exchanges under one roof.
After an almost 9-month gestation period, the votes delivered one huge, almost $12 billion baby.
CME Group will be the world's largest derivatives exchange and control more than 85 percent of U.S. futures and options-on-futures volume.
"This is the greatest trade in the history of Chicago and I think it's one of the few trades that both sides are big winners," said Charles Carey, chairman of the 159-year-old CBOT.
The deal was easily approved. A competing bid from the upstart Intercontinental Exchange Inc (ICE.N) was fended off after CME on Friday improved its bid for a third time since original terms were announced in mid-October.
Preliminary results of separate ballots at each exchange showed an "overwhelming" majority in favor of CME's purchase in a package worth about $11.9 billion, exchange officials said.
"Today has been a long time in coming," said Terry Duffy, executive chairman of CME.
Australian investment firm Caledonia Investments Pty Ltd, the largest owner of CBOT shares, dropped its opposition to the deal after the terms were improved. At that point many skeptical CBOT member/shareholders also changed their view.
Shareholders of the Chicago Board of Trade's parent will receive 0.375 shares of CME Holdings common stock for each share of CBOT, up from 0.35 in the earlier agreement and 0.3006 when the deal was first announced in October.
"During this time the target seems to have become relatively more attractive," said Edward Ditmire, analyst at Fox-Pitt Kelton in New York.
Atlanta-based ICE, which stormed into the spotlight with an unsolicited bid for CBOT in mid-March, did not attempt a last-ditch effort to trip up the deal.
After the vote, ICE chief executive Jeffrey Sprecher sent an open letter to CBOT members and shareholders, noting that ICE's involvement in the process has helped create nearly $3 billion in extra value.
HARD WORK STARTS
CME and CBOT, bitter rivals for decades but recent close collaborators, will now start to deliver their promised "cost synergies," which most see as code for "huge layoffs."
The hammer is likely to fall hardest at CBOT. In January the companies announced the bones of a post-merger leadership team, drawing from CME personnel in almost all cases.
"There certainly will be people who will be affected. That's something we'll have to deal with as part of our integration process after the close," Craig Donohue, CME's chief executive, told reporters. "We haven't yet identified what those numbers are."
CME Group plans to house all its open-outcry trading at CBOT's landmark 1930 Holabird & Root building at the southern end of LaSalle Street, Chicago's financial strip.
The electronic "home" of CBOT's derivatives trading will become Globex, CME's trading platform.
Bernard Dan, CBOT president, said all CBOT products will be available on Globex by the end of March, 2008, and that reconfiguring the trading floors should be finished by the end of June.
CME shares closed at $570.58, down $4.22, or 0.7 percent, on the New York Stock Exchange. CBOT closed down $1.18, or 0.5 percent, at $222.82. ICE finished up 69 cents, or 0.4 percent, at $156.78. (Additional reporting by Christine Stebbins in Chicago, Anupreeta Das and Mark McSherry in New York and Jessica Hall in Philadelphia)
