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CME Wins Shareholder Backing for Nymex Takeover

CME received the backing of the minimum 75% of Nymex members and minimum 50% of shareholders last week (18 August) in its takeover bid, clearing the way for the exchanges to officially merge. The companies closed the transaction last Friday (22 August).

 

About 650 of 816 Nymex members voted to approve the deal, cementing CME Group’s status as the world’s largest derivatives market.

 

“The addition of Nymex to CME Group creates an even stronger international company as we continue to grow our business globally and compete with exchanges and the over-the-counter market. The combination of these exchanges will create immediate and long-term value for our shareholders and customers as we are now the only exchange to offer access to every global benchmark product,” says CME Group executive chairman Terry Duffy.

 

CME and Nymex originally agreed the deal in March (see Squawkbox, March 24) but Nymex shareholders’ approval was needed and they proved to be no pushovers — some even filed a class action suit against the companies, so dissatisfied were they with the price of the deal especially as CME’s share price had plummeted after it put in an offer for the New York exchange. 

 

Originally CME had offered 0.1323 shares of CME Group Class A common stock plus $36.00 in cash for each share of Nymex stock outstanding. Also, as part of the transaction, Nymex was required to offer to purchase the 816 outstanding Nymex Class A memberships for a total of $500 million – equivalent to around $612,000 per member.

 

Later CME improved the offer to include a share buyback program of class ‘A’ common stock of up to $1.1 billion as well as offering Nymex shareholders a special dividend of $5.00 per common share (see Squawkbox, 30 June). CME is now purchasing the 816 outstanding Nymex Class A memberships at around $750,000.

 

The merged entity is estimated to control almost 98% of the US listed futures market, including foreign exchange and commodities. Cost synergies, partly from merging clearing operations, are expected to amount to $60 million. Once the merger is complete Duffy and Craig Donohue, CME Group chief executive officer will remain in their present roles while the board of directors of CME Group will add three directors from Nymex.

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