Chicago Merc and Board of Trade Want to Merge

There’s a new wrinkle among the “old guard.”  Chicago Mercantile Exchange Holdings, Inc. and CBOT Holdings, Inc. on Oct. 17 announced they have signed an agreement to merge.  The merger will not impact core trading rights or membership or clearing privileges at either exchange. The new company says it will be the leading agricultural trading complex consisting of grains and livestock futures contracts and the largest electronically traded agricultural futures complex.

The transaction is expected to close by mid-year 2007, pending approvals by regulators, and shareholders of both companies, as well as completion of customary closing conditions.  The combined company will be named CME Group, Inc., a CME/Chicago Board of Trade Company.  CBOT sold its first agricultural futures contract in 1848. CME formed as a non-profit corporation in 1898.

The average daily trading volume of the new company is expected to approach 9 million contracts per day, representing approximately $4.2 trillion in national value. Based on the closing stock prices of CME and CBOT on Oct. 16, the last trading day prior to the announcement of the merger, the combined company is valued at $25 billion (CME equity $18 billion; CBOT equity $7 billion).

When the merger is complete, Terrence A. Duffy, chairman of CME, will become chairman of the combined organization.  Charles P. Carey, chairman of CBOT, will become vice chairman of the combined organization.  The board of directors of the combined company initially will be comprised of 29 directors, 20 designated by CME and nine by CBOT.

“Growth in the global derivatives industry is accelerating and new competitors are emerging in exchange, over-the-counter and other unregulated markets,” said Craig Donohue, CME chief executive officer.  “As a combined company, we will be better positioned to capitalize on these trends and compete more effectively as our industry continues to transform.”