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CME Sweetens CBOT Bid With $485 Million Dividend

The battle for the No. 2 U.S. futures exchange rages on, with Chicago Mercantile Exchange Holdings beefing up terms of its offer for CBOT Holdings for the second time in a month.

The latest steps from the largest futures mart follow an improved proposal on Tuesday from Atlanta-based energy exchange IntercontinentalExchange, which has been pursuing a hostile bid for CBOT since March.

“We’re very pleased to be able to bring this offer to the Chicago Board of Trade and its shareholders,” Terry Duffy, executive chairman of the Chicago Mercantile Exchange, told CNBC’s Rick Santelli in an exclusive interview today.

Duffy told Santelli he expects the two organizations will be able to benefit from combining a number of products onto a single platform. He expects further benefits from converting the floor from the CME over to the CBOT.

Those terms include a $9.14-a-share special dividend for CBOT shareholders that for a CBOT "full member" equates to a payout of about $250,000.

CME also announced a plan for exercise rights -- those held by CBOT members to trade at the Chicago Board Options Exchange -- that it termed superior to a deal struck between CBOE and
ICE last month.

Rights holders would have the ability to continue as a class member in a lawsuit CBOT is pursuing against CBOE, or opt out of the suit and take a payout at the close of the CME-CBOT merger.

The move is a "great response" to concerns raised by CBOT members about the future of the exercise rights, said CBOT Chairman Charles Carey.

At current share values, ICE's offer values CBOT at about $11.1 billion versus CME's $10.2 billion.

ICE added cash to its stock bid on Tuesday, a day after the U.S. Department of Justice gave regulatory clearance for CME and CBOT to merge into the world's largest derivatives exchange.

But CBOT's board said Thursday that the ICE proposal was not superior to CME's latest terms, adding that it does not address important strategic and operational concerns.

Last week CBOT said risks to its futures trading franchise from a partnership with ICE could be "catastrophic."

"ICE has been rejected not once, but twice," Donohue said.

A spokeswoman for ICE said they had no immediate comment.