ICE Urges CBOT Members to Defy Board on CME Deal

IntercontinentalExchange, on Thursday took its unsolicited takeover proposal for the Chicago Board of Trade directly to members of the CBOT, urging them to support ICE's bid over that of the Chicago Mercantile Exchange.

Jeffrey Sprecher, chief executive of the Atlanta-based energy mart, addressed several hundred CBOT members in an hours-long question-and-answer session at a downtown Chicago hotel.

ICE has been vying with CME for CBOT Holdings since mid-March, stepping into the middle of a deal that seemed to be progressing toward the marriage of the two largest U.S. futures exchanges.

At Thursday's meeting, which was also Webcast and teleconferenced, Sprecher stressed the 14% premium that ICE's bid holds to the CME proposal, which was endorsed by CBOT's board of directors this month.

CBOT's board has cited greater integration risk involved in a possible deal with ICE compared with CME.

The CME and CBOT already have a joint agreement for clearing futures trades, and have been working on integration issues since their proposed merger was announced in October.

By contrast, ICE's U.S.-based clearing facility is a fraction of the size of CME Clearing.

Integration Risk

"Is there integration risk? Yeah. Every merger has integration risk," Sprecher said. "If you really want a no-risk merger you have one choice."

Sprecher said that CBOT members and shareholders, as well as the U.S. Department of Justice, all had a say in the CBOT's future plans, but that only the CBOT's board had been heard from so far.

One long-time CBOT member, Harlan Krumpfes, thanked Sprecher for unlocking billions of dollars in additional value at CBOT compared with the CME's original takeover proposal made in October.

The CBOT should replace the statue of Ceres, the goddess of grain, from atop its historic Art Deco building with Sprecher's likeness, Krumpfes said.

Responding to the ICE bid, CME this month raised its bid for CBOT by about 16% from the original October level, to about $9.2 billion.

Some members said they were worried that ICE sees the Board of Trade's historic open-outcry trading floors more as an anachronism than an asset, and would quickly move to shutter the floors once a merger took place.

Sprecher said that trading floors closed at some of ICE's other exchange properties had been done at the request of members, not against their will.

CBOT members and shareholders, as well as CME shareholders, are due to hold separate ballots on July 9 on whether or not to approve the CME-CBOT merger.

CBOT's board distributed letters to members this week outlining the benefits of the CME-CBOT combination to members and shareholders.

The proposed deal is also subject to approval from the DOJ, which is thought to be casting a keen eye on a combination that would control more than 85% of U.S. futures and options on futures volume.

On the New York Stock Exchange on Thursday ICE closed at $144.94 per share, down $3.77 or 2.5%. CME closed at $531.00, up $3.15 or 0.6%, and CBOT closed at $196.61, down $1.01 or 0.5%.