CME's battle to buy CBOT set to end in victory

CHICAGO (Reuters) - Shareholders on Monday wrap up voting on a merger deal that would combine the parents of the Chicago Mercantile Exchange and Chicago Board of Trade to create the world's largest derivatives exchange.

Most analysts predict victory for Chicago Mercantile Exchange Holdings Inc. CME.N after the company improved its bid for a third time on Friday to quell dissent among CBOT Holdings BOT.N shareholders.

A vote that looked like it might be a toss-up, given a higher competing bid for CBOT from IntercontinentalExchange Inc. (ICE.N), now has the makings of a landslide.

At the CBOT early on Monday member/shareholders were lined up to cast their ballots, with most saying they now favor the move by CME to absorb the 159-year-old Board of Trade.

The Wall Street Journal reported in its online edition on Sunday that ICE had decided against raising its takeover bid. An ICE spokeswoman declined to comment on the report.

ICE Chairman Jeffrey Sprecher is scheduled to appear at a Senate subcommittee hearing on excessive speculation in natural gas trading later on Monday.

CME Chief Executive Craig Donohue said on Friday that he was "very, very confident" that shareholders would approve the CBOT purchase, which was first announced in mid-October.

Caledonia Investments Pty. Ltd., the largest owner of CBOT shares, dropped its opposition to the deal after terms were improved.

Ray Cahnman, a former CBOT board member and owner of four CBOT memberships, said Caledonia's decision to vote for the deal had a huge influence on other members.

Cahnman previously opposed the CME-CBOT deal, but said he would now vote for it. "Caledonia are very shrewd and very experienced," he said.

CBOT members and shareholders and CME members have been voting for a week. The process will culminate in separate meetings on Monday afternoon.

At Friday's closing prices, CME's bid was worth about $11.9 billion, including a one-time special dividend by CBOT payable upon the deal closing. ICE's bid valued CBOT at about $11.8 billion.

CME's raised offer calls for the exchange of 0.375 shares of the company's common stock, up from 0.35 in the earlier agreement, for each CBOT share. CBOT shareholders would now hold about 36 percent on the combined company.

In morning New York Stock Exchange trade, CME shares were down $6.17, or 1.1 percent, at $568.63. CBOT dropped $2.25, or 1 percent, to $221.75, while ICE was up $1.07, or 0.7 percent, at $157.16.

(Additional reporting by Christine Stebbins in Chicago, Anupreeta Das and Mark McSherry in New York and Jessica Hall in Philadelphia)