“CME’s increasing attempts to discredit ICE don’t change the fact that our offer is clearly superior – the ICE offer provides much higher current value, is pro-competitive, and will create a stronger business that we believe is better positioned for future growth.”
The Facts:
- Based on yesterday’s closing prices, the ICE proposal is valued at $184.25 per CBOT share, over 13% or approximately $1.2 billion above the CME proposal, which is valued at $162.47 per CBOT share. CME today said they have “no need to address” this valuation differential. CBOT shareholders would own approximately 51.5% of the combined company vs. only 31% in the CME transaction, increasing their participation in the substantial strategic and financial benefits of the combination.
- ICE has smoothly integrated two exchanges from prior acquisitions, IPE and NYBOT, which has resulted in significant benefits for customers and increased value for shareholders (including the former owners of these exchanges). In contrast, CME has no exchange integration experience.
- Based on its track record, ICE is confident its $240 million in estimated total synergies are readily achievable. ICE’s cost savings estimates of $100 million are equivalent to the CME estimate. CME has not indicated an estimate of revenue synergies, of which CBOT shareholders would only share 31%.
- ICE is a more liquid stock, with average daily volume in ICE shares currently twice that of CME. In addition, ICE shares have appreciated 257% since the beginning of 2006 vs. 47% for CME. Despite ICE’s superior appreciation, it has a lower PE ratio than CME. ICE has grown EPS at an average quarterly rate of 34%.
- While ICE believes the combined entity’s opportunity to create additional shareholder value is significant, ICE has indicated flexibility in including a cash component in its offer, and expects to discuss such an alternative with the CBOT. In past acquisitions, ICE has included a significant cash component.
- Competition from Globex, Liffe and others has always required that ICE maintain a leading technology platform. ICE’s platform has scaled from OTC to listed futures and from energy into soft commodities, while improving performance more quickly than any other derivatives exchange.
- ICE is committed to building and investing in a clearinghouse that offers a new level of service to the FCMs, customers, exchanges and the broker community. ICE has until January 2009, when CBOT’s existing clearing agreement with CME could be terminated, to scale up to meet demand.
- Unlike a CME/CBOT combination, ICE believes there are no significant antitrust risks in an ICE/CBOT combination. ICE believes CBOT shareholders are entitled to know the outcome of the Department of Justice’s investigation of the CME/CBOT transaction before they vote.
- Based on Futures Industry Association data, an ICE/CBOT combination would have pro forma 2006 U.S. market share of 33.4% vs. 87.3% for a CME/CBOT combination (including NYMEX contracts traded on Globex). A CME/CBOT combination would have the following market shares in certain key products:
- Interest rates: 100.0%
- Equity indices: 99.7%
- Foreign currencies: 96.8%
- Interest rates: 100.0%
- Based on Futures Industry Association data, an ICE/CBOT combination would have pro forma 2006 U.S. market share of 33.4% vs. 87.3% for a CME/CBOT combination (including NYMEX contracts traded on Globex). A CME/CBOT combination would have the following market shares in certain key products:
- ICE is committed to preserving and better monetizing the many valuable CBOT assets, including its fixed income and agricultural markets, its CBOE trading rights, its precious metals complex, and its strong global brand. ICE is also willing to commit to open outcry trading beyond what the CME merger agreement contemplates and would maintain the established floor to promote competition and liquidity.
Additional Information
Detailed information about the ICE proposal is available under “Webcasts and Presentations” on www.theicecbot.com.
