ICE resubmits merger proposal to Chicago Board of Trade; board continues to recommend CME plan

By Laura Lutz

Des Moines, July 3 - IntercontinentalExchange, Inc. (ICE) resubmitted a proposal for a merger with CBOT Holdings, Inc., according to an ICE press release. ICE described its revised proposal as superior to the merger proposal submitted by Chicago Merchantile Exchange Holdings Inc. (CME), a claim that CME disputed in its own release.

Later on Tuesday, CBOT Holdings, Inc.'s board and special transaction committee said in a news release that the new ICE proposal is not superior to the CME proposal, and the board continued to recommend the CME merger agreement.

ICE said that CBOT may accept its proposal until 5 p.m. ET on July 12 if CBOT Holdings stockholders and members reject the CME proposal.

"ICE remains fully committed to an ICE/CBOT combination," ICE said in its release. The company said it is "ready to engage in discussions regarding an enhanced [Chicago Board Options Exchange] exercise rights agreement, as well as other creative solutions to preserve the value of, and provide liquidity for, B-1 and B-2 memberships, including a possible tender offer."

In response, CME said that the ICE had not addressed "the fundamental strategic and operational flaws in its proposed transaction."

"ICE has also put forward a speculative ERP offer that significantly undervalues those rights and which has not even been approved by [Chicago Board Options Exchange] members, let alone the Delaware court or CBOT members," the CME release said.

CBOT's board and special transaction committee met and reviewed the ICE proposal, according to the CBOT release.

"Nothing important has changed from the offer ICE submitted on June 12th. ICE has not resolved the significant risks identified during the comprehensive due diligence we conducted of ICE and its trading and clearing systems," CBOT chairman Charles P. Carey said in the release.

"ICE has not adequately addressed important strategic and operational concerns, such as integration and execution risk," CBOT president and chief executive officer Bernard W. Dan said in the same release. "In our view, ICE's proposal that we migrate our clearing operations twice, first to AEMS and then to ICE, compounds the risk and would create even greater disruption for our market users."

The board concluded, "The board of directors of CBOT Holdings continues to unanimously recommend that stockholders vote 'For' the adoption of the agreement and plan of merger with CME, and the board of directors of CBOT unanimously recommends that CBOT members vote 'For' the matters related to the CME merger as described in the joint proxy statement/prospectus and the supplement."

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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