UPDATE 2-CME tweaks NYMEX deal terms to win over critics
(Adds company, member comments, background, byline)
By Ros Krasny
CHICAGO, July 18 (Reuters) - CME Group Inc CME.0, the world's largest derivatives exchange, on Friday revised details of its plan to buy energy and metals market NYMEX Holdings Inc NMX.N in a drive to win over critics who have threatened to sink the deal.
CME -- in its "final offer" -- took on the complaints voiced by many NYMEX members and shareholders while leaving unchanged the financial terms set in January.
Among the changes announced on Friday were larger payouts for NYMEX members and much smaller "golden parachutes" for top NYMEX executives.
The combined entity would be a behemoth, controlling some 98 percent of the U.S. futures and options-on-futures market. Approval from the U.S. Department of Justice came through in late June after a lengthy review.
At least 75 percent of NYMEX's Class A members must vote in favor of the purchase, and CME Executive Chairman Terry Duffy said the revised terms should clinch the deal.
"I'm very comfortable we'll achieve that number," Duffy told Reuters in an interview. "We have listened to the members, and we have reevaluated."
NYMEX member Bobby Sahn, until now a top agitator against CME, said he will support the takeover.
"I'm going to support the deal and vote for it with my trading rights and stock because ... we'd be much better off with new management," Sahn told Reuters.
General Atlantic LLC, an investment firm which holds about 7 percent of equity in NYMEX, endorsed the new terms and committed to vote in favor of the merger.
"We believe it provides the best strategic opportunity for NYMEX's long-term growth," said Bill Ford, CEO of General Atlantic and a board member at NYMEX.
The companies said NYMEX shareholders and members as well as CME Group shareholders will vote on the deal on Friday, subject to a regulatory review. July 18 is the as-record date to vote at the companies' special meetings.
NEW TERMS ADDRESS CRITICS
The new deal increases the payment to be made to NYMEX Class A members to $750,000 per membership from $612,000 announced earlier, and retained the right for those members to use or lease out their seats.
Top NYMEX officials, including Chief Executive James Newsome and Chairman Richard Schaeffer, agreed to receive much-smaller "change of control" payouts. Certain other merger-related expenses will also be trimmed, for a total savings of $30 million, CME said.
CME committed to keep a NYMEX trading facility in New York City through the end of 2012 and to operate a trading floor beyond that if profitability and revenue thresholds are met.
Separately, the companies agreed to extend the term of a technology partnership -- under which NYMEX contracts are traded on CME's Globex trading platform -- for an additional two years, until 2018.
That move makes a "no" vote less likely, said Edward Ditmire, analyst at Fox-Pitt Kelton in New York.
"If they were to vote against this deal, it's incrementally tougher to ween themselves off of the CME relationship, which would be necessary if they wanted to sell the company to a different exchange," Ditmire said.
The merger deal calls for the exchange of 0.1323 of CME's shares and $36 in cash for each NYMEX share.
The deal's value has fallen sharply since it was announced on Jan 28 as CME shares have dropped to as low as $282 from $625.
Diego Perfumo, analyst at Equity Research Desk in Greenwich, Connecticut, said there was now "a very high certainty" that the transaction would go through.
"In these market conditions, there was no need for the CME to give any more to the NYMEX shareholders because they don't have any better option," Perfumo said.
On Friday CME shares slipped to $331.59, down $3.21, or 1 percent, while NYMEX fell 88 cents, or 1.1 percent, to $77.22. (Additional reporting by Jonathan Spicer in New York, editing by Mark Porter)
