Members of the New York Mercantile Exchange are threatening to block CME's bid unless they're offered an additional $408 million, Nymex members' second threat to end the deal, according to ChicagoBusiness.com
Mercantile Exchange members are threatening to block CME Group Inc.'s $8.7 billion takeover bid unless they get an extra $408 million from the Chicago firm.
"There is a big lobbying effort going on here," says Stanley Meierfeld, a former Nymex director. The dissidents were circulating a petition last week among the exchange's 816 members, soliciting votes against the deal. Just 205 votes are needed to kill it.
A previous threat to veto the deal forced CME, which runs the Chicago Mercantile Exchange and the Chicago Board of Trade, to bump up its original bid. CME termed that offer, made July 18, "full and final," making it difficult to renegotiate.
Under the sweetened bid, the exchange increased the payout to Nymex members by $112 million, to $612 million. Left unchanged was CME's cash and shares payment to Nymex shareholders, the value of which has dropped 31% to $8.2 billion since it was announced in January.
While the increase mollified some, it spurred others to action. One member said that he was told late last month that more than 130 of his fellow members signed the petition. The vote on CME's offer is set for Aug. 18.
If the dissidents can get enough members "to vote against it, it stops, and it's probably a pretty good chance that they can," Mr. Meierfeld says.
Nymex members who oppose the deal are helped by a rule that counts those who abstain from voting as "no" votes.
Chief Executive Craig Donohue and Chairman Terrence Duffy held back-to-back meetings with dozens of Nymex members in Manhattan last Wednesday and Thursday, pitching the deal as a "compelling transaction" that would create "the world's largest and most diverse derivatives exchange," according to a copy of the presentation filed with the Securities and Exchange Commission.
Gary Glass, a former coffee, sugar and cocoa trader who at one time claimed to have corralled more than 300 votes against the original deal, has dropped his objections. "I'm going to hold my nose and vote for it," he says.
"Most people are so sick and tired of the management they would take a deal at any price," adds former fellow dissident Robert Sahn. Mr. Sahn says he'll wait to cast his vote until the last minute and, like many other members, will vote "yes" as long as CME shares stay above $360. They closed Friday at $332.94.
But others continue to press for more money. The dissidents say they should be paid $1.25 million each for their trading rights, which would increase CME's bid by as little as 5%. But Messrs. Donohue and Duffy appear ready to allow the vote to go forward on current terms. No opposition member would comment. A CME spokesman also declined to comment.
Taking a hard line on not raising the bid may be no more than bluster, says Craig Pirrong, a University of Houston professor who studies exchanges.
"They can't really tie themselves to the mast and go down with the ship," Mr. Pirrong says. "If it's a choice between saying, 'Whoops, never mind — it wasn't our final offer after all' and losing the deal, they'll choose 'Whoops, never mind.' "
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