By Edgar Ortega and Elizabeth Hester
Aug. 18 (Bloomberg) -- Nymex Holdings Inc. shareholders voted to approve CME Group Inc.'s $8.3 billion takeover offer, completing a transaction that may stem CME Group's 51 percent slide on the New York Stock Exchange this year.
A majority of CME and Nymex investors voted for the deal today in New York and Chicago, the companies said in a news release. The transaction cements CME Group's status as the world's largest derivatives market. About 650 of 816 Nymex members voted to approve the deal, Nymex Chairman Richard Schaeffer said on a conference call.
CME Group Chief Executive Officer Craig Donohue and Chairman Terry Duffy met with shareholders in the past two weeks to shore up support after some Nymex members said they would reject the offer. Donohue, 42, sweetened the offer twice, and last week two chief opponents dropped their complaints.
``In the exchange landscape of the future, there will be three to four big companies, global with different types of products,'' said Michael Henry, senior executive in the capital markets group at consulting firm Accenture. ``CME wants to be one of those companies. It's defending it's home turf by acquiring U.S.-based derivatives exchanges, but it still needs to make that move and show that it can act globally.''
The deal is expected to close Aug. 22.
Largest Transaction
CME Group, which tops No. 2 Eurex AG among derivatives exchanges, trades everything from futures on corn and U.S. Treasury debt to benchmark contracts for oil and natural gas. The transaction is the largest this year among exchanges, which are racing to meet investor demand for lower-cost electronic trading. More than $62 billion in acquisitions have been announced or completed since the start of 2007, according to Bloomberg data.
Prospects for the deal improved Aug. 14, when two Nymex members, Robert Sahn and Gary Glass, reversed their opposition and urged members to vote in favor. They campaigned to negotiate better terms. A majority of shareholders and at least 75 percent of Nymex's 816 members needed to approve the deal. Nymex said about 80 percent of members voted in favor.
The slump in CME Group shares this year cut $3.35 billion from the acquisition value since it was announced Jan. 28. The stock dropped $21.03, or 5.9 percent, to $336.64 in composite trading in New York today. Nymex fell $2.16 to $79.95.
Under the proposal, CME offered $36 in cash and 0.1323 of its shares for each Nymex share. The Nymex members, who hold Class A shares and have the right to trade at the exchange, will also get $750,000 in cash. The original proposal offered $612,000. CME said the transaction is valued at $8.3 billion.
Special Dividend
Approval paves the way for CME Group to proceed with a special dividend of about $350 million and a plan to repurchase as much as $1.1 billion of its shares.
The deal may help boost shares of the combined company as executives wring out expenses and use their dominance of exchange-listed derivatives to enter new businesses. CME may be able to eliminate as much as $100 million in costs, instead of the company's forecast of $60 million, said Justin Lumiere, a merger arbitrage analyst at brokerage ICAP in New York.
CME also gets Nymex's business clearing over-the-counter futures in the energy market. Together the companies will guarantee about 98 percent of the exchange-listed futures that change hands in the U.S., and will seek to expand to other assets such as the credit-default swap market that now trade privately among banks.
``They're going to have the strongest clearinghouse in the world and that's going to help them penetrate the over-the- counter market,'' said Diego Perfumo, who follows exchanges at Equity Research Desk in Greenwich, Connecticut. ``If you're strong, you have better chances in entering the over-the-counter market, especially now with concerns around counterparty risk.''
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