June 22, 2007 / 1:20 PM / 12 years ago

UPDATE 2-ICE to buy Winnipeg exchange for C$40 mln

(Recasts first sentence, adds Winnipeg CEO’s comments from interview)

By Roberta Rampton

WINNIPEG, Manitoba, June 22 (Reuters) - IntercontinentalExchange Inc. (ICE.N), the upstart Atlanta-based energy bourse that is fighting to merge with the Chicago Board of Trade, plans to take over the Winnipeg Commodity Exchange in a deal worth C$40 million ($37.4 million), the ICE said on Friday.

The acquisition of the privately held WCE, known for its canola futures contract, is worth C$62.08 ($58.04) per share.

The 120-year-old WCE had said in April it hired an investment bank to look at its options because of global consolidation among exchanges.

“It’s a great transaction for our shareholders, it’s a great transaction for our contracts ... and it’s good for Winnipeg,” said Mike Gagne, the WCE’s chief executive.

The deal would solve technology issues for the Winnipeg exchange, which closed its open-outcry trading floor in 2004 to become the first North American agricultural futures exchange to trade exclusively on an electronic platform.

“We didn’t have our own trading platform, or a clearing platform for that matter,” Gagne told Reuters in an interview.

The WCE trades via the Chicago Board of Trade’s electronic platform, and uses clearing services from the Kansas City Board of Trade.

ICE said it would convert WCE contracts to the ICE platform during the fourth quarter.

The deal, which ICE said it expects to close in the third quarter, must be approved by two-thirds of the Winnipeg exchange’s shareholders, the majority of which are grain companies.

Gagne declined to comment on whether the WCE entertained other offers, and whether the ICE deal represented a premium for WCE shares.

In April, there were reports that the privately held WCE shares traded for C$40 per share, triple the value of trades done a few months earlier,

Gagne also declined to say whether the WCE expects other offers to emerge. The deal includes a C$1.2 million termination fee if the WCE accepts a superior competitive bid that ICE fails to match, which Gagne said was a “standard clause” for a takeover deal.

A Manitoba court and the provincial Manitoba Securities Commission must also approve the deal, which would involve ending a 15 percent cap on ownership of WCE shares.

The WCE would continue to keep an office and its small core staff in Winnipeg as a subsidiary of ICE, Gagne said, and the Manitoba Securities Commission would continue to oversee its operations.

ICE and Chicago Mercantile Exchange Holdings Inc. CME.N have been locked in a bidding war for CBOT Holdings Inc. BOT.N since March. CBOT Holdings is the parent of the Chicago Board of Trade, the No. 2 U.S. futures exchange.

CME recently sweetened the terms of its deal with CBOT, following an improved proposal from ICE.

ICE, virtually unknown in the futures business just a few years ago, stunned the industry with its unsolicited bid for CBOT.

($1=$1.07 Canadian)

((Reporting by Roberta Rampton, editing by Matthew Lewis; Reuters Messaging: roberta.rampton.reuters.com@reuters.net; + 204 947-3548))

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