NYMEX Offers to Purchase Majority Shares of IPE

The New York Mercantile Exchange (NYMEX) this morning sent a letter to the International Petroleum Exchange (IPE), offering to purchase between 55 and 70% of the IPE under the same for-profit holding company structure offered to it in a proposal presented by outside investors. The NYMEX board of directors approved the bid at a special meeting this morning at which it also agreed to retain outside counsel and investment banking and other consultants to explore the possibility of seeking investment interest in NYMEX under a similar structure to that proposed for the IPE. In a letter to IPE Chief Executive Lynton Jones, Exchange Chairman Daniel Rappaport said, 'in view of the fact that the outside investor proposal failed to obtain the requisite 75% majority, on behalf of NYMEX, we are pleased to present an alternative proposal for consideration by the IPE's board of directors and its members.' The NYMEX proposal is based on the same holding company valuation as the outside investor proposal. NYMEX would purchase at least 55% of the IPE equity and offer the five firms named by the IPE in the outside investor proposal the opportunity to subscribe for an additional 5% apiece for a total of 25%. If any or all of those firms do not wish to participate, the letter states that NYMEX is willing to commit to either find additional investors or itself fund the purchase of up to 70% of the IPE equity. The proposal will provide the IPE members with the same trading right protections as the outside investor proposal and also commits that it will not introduce trading on NYMEX in any IPE contract during open outcry hours and will not change any of the IPE's existing trading or settlement procedures, including exchange of futures for swaps. Mr. Rappaport stressed the advantages to both exchanges and its common constituencies in a combined entity. He said, 'What we propose offers each of us the best opportunity to maintain and grow our respective franchises in the face of a rapidly changing global environment. NYMEX's proposal offers the IPE strategic and synergistic benefits that go far beyond those available to the IPE if it were to combine with outside investors excluding NYMEX. We look forward to working with the outside investors in a for-profit entrepreneurial environment and would like to explore the possibility of expanding application of this concept to NYMEX.'