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CME in talks to buy Nymex

It proposes $11 billion for the energy and metals market.

January 29, 2008|From Reuters

CME Group Inc., the largest operator of exchanges for trading options and futures, hopes to broaden its reach by buying energy and precious-metal market Nymex for $11 billion, the companies said Monday.

The proposal would keep up a breakneck pace of consolidation among U.S. and foreign financial exchanges, many of which have staged successful initial public offerings in recent years.

Under the terms being discussed, Chicago-based CME would pay shareholders of Nymex Holdings Inc. $36 in cash and 0.1323 of a CME common share for each Nymex share owned.

Based on CME's closing price Friday, the preliminary offer values Nymex shares at $119.22 each, an 11% premium to Nymex's closing share price Friday.

Nymex shares climbed $9.34, or 8.7%, to $116.50 on word of the talks, while CME fell $4 to $625.

CME was created in July 2007 when Chicago Mercantile Exchange Holdings bought the Chicago Board of Trade, then its biggest rival among U.S. futures exchanges.

Nymex operates the New York Mercantile Exchange, the world's largest physical exchange for trading commodity futures. It boasts more than 130 years of trading history and went public in November 2006.

The exchange trades an array of energy contracts, including crude oil, gasoline, natural gas and electricity, and precious metals such as gold, silver and copper through its Comex division.

Nymex's trading products have little overlap with CME's strength in products that enable speculation on interest rates, foreign exchange, stock index and agricultural commodities. As a result, many analysts expect a deal to survive antitrust scrutiny.

Antitrust attorneys hired to shepherd the deal would probably argue that despite the huge market share at the combined exchange, the rise of electronic exchanges would reduce CME's market dominance, said Michael Keeley, a partner at Axinn, Veltrop & Harkrider in New York.

"Given the trend in exchanges in general, the barriers to entry to electronic trading are low," he said.

Nymex has a spirited competitor in energy derivatives, Atlanta-based Intercontinental Exchange Inc. Over-the-counter trading in energy derivatives is also thriving.

Nymex has listed many of its products on CME's Globex electronic trading platform since June 2006, fueling expectations that a closer relationship would follow.

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