CBOT finds ICE proposal not superior, moves forward with revised Chicago Mercantile agreement

By Lisa Kerner

Charlotte, N.C., June 14 - IntercontinentalExchange, Inc.'s proposal is not superior to a revised Chicago Mercantile Exchange, Inc. merger agreement announced on Thursday, according to CBOT Holdings, Inc.'s board of directors and special committee.

The CBOT board and committee unanimously reaffirmed their recommendation that its shareholders vote in favor of the revised merger agreement with Chicago Mercantile on July 9.

"ICE's revised proposal did not adequately address important strategic and operational concerns, such as integration and execution risk," CBOT president and chief executive officer Bernard W. Dan said in a company news release.

"A combination with the CME will create the most extensive and diverse global derivatives exchange while delivering significant benefits to shareholders and customers."

Under Chicago Mercantile's revised terms, all CBOT shareholders will receive a one-time cash dividend of $9.14 per share, or a total of $485 million. Eligible holders of Chicago Board Options Exchange exercise right privileges may also choose to continue as a class member in the CBOE lawsuit or sell each exercise right privilege to the company for $250,000.

"We believe that this one-time dividend to all CBOT shareholders and the unique ERP guarantee and purchase offer further improve the value of a merger with CME over the unsolicited ICE proposal," Chicago Mercantile executive chairman Terry Duffy stated in a news release.

"We recognize that different CBOT members may have different preferences for realizing value for their ERP rights. The combination of the substantial cash dividend for all CBOT shareholders and the more flexible and potentially more valuable ERP guarantee better addresses CBOT shareholders' interests and positions us to successfully complete our shareholder and member votes on July 9."

The terms of the revised merger agreement continue to include Chicago Mercantile's obligation to make a $3.5 billion cash tender offer at $560 per share shortly following the closing of the merger.

Under the amended Oct. 17, 2006 agreement, CBOT shareholders will receive 0.35 of a share of Chicago Mercantile class A common stock for each share of CBOT Holdings class A common stock, a 16% increase from the original deal. In addition, CBOT Holdings representatives will fill 10 of the 30 seats on the combined company's board of directors.

CBOT Holdings operates the Chicago Board of Trade, a Chicago derivatives trading exchange. Chicago Mercantile Exchange is the first publicly traded U.S. financial exchange.

IntercontinentalExchange is an Atlanta-based electronic energy marketplace.

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