U.S. News

CME Chief Executive Sees CBOT Merger Going Through

The head of the Chicago Mercantile Exchange voiced confidence that the company will prevail over a rival bidder in efforts to buy the Chicago Board of Trade, predicting approval from both federal regulators and CBOT shareholders in the coming weeks.

Craig Donohue, CEO of Chicago Mercantile Exchange Holdings , gave no indication on a conference call that his company plans to increase its approximately $9.8 billion offer even though it's $1 billion short of the competing proposal from IntercontinentalExchange . Both offers are all-stock.

Calling the Merc bid "absolutely superior," he raised questions about the stability of the Atlanta energy exchange's stock price and its ability to clear trades if it absorbs Board of Trade parent CBOT Holdings .

"I just don't believe, and I don't think the majority of our clearing-member firms believe, that operationally they're up to the task and that they're in a position to handle the much larger and more complicated markets of the Board of Trade," Donohue said.

"ICE is a very narrow exchange, it trades energy and it trades soft commodities, it has very little experience or knowledge in the financial instruments world," he said.

Donohue maintained that there's "a ton of ambiguity" about ICE's clearing plans.

The two exchanges have been stepping up their lobbying efforts -- and volleys at each other -- as the July 9 vote by CBOT shareholders on whether to approve the Merc's proposal nears.

A day earlier, several hundred traders from the Board of Trade quizzed ICE Chief Executive Jeffrey Sprecher at a meeting in a Chicago hotel ballroom. Sprecher pointed to the higher price of the ICE bid and pledged to keep the exchange headquartered in Chicago and majority-owned by Board of Trade shareholders.

Donohue voiced optimism that Department of Justice regulators will sign off on the deal soon, saying the process is in "a very advanced state."

"We're very confident that we will" complete the deal, he told analysts. "This combination is absolute first best in terms of the synergies that are available and also in terms of our confidence level and our ability to extract all of the synergies."

Donohue also said he remains confident that the CME/CBOT deal will get approval from the U.S. Department of Justice before the vote, saying the process is in "a very advanced state."