CME and CBOT Revise Merger Agreement to Provide Increased Value to CBOT Shareholders
June 14 2007 - 9:50AM
PR Newswire (US)
Agreement Delivers One-Time Cash Dividend to All CBOT Shareholders
and Guarantee for Holders of CBOE Exercise Rights CHICAGO, June 14
/PRNewswire-FirstCall/ -- Chicago Mercantile Exchange Holdings Inc.
(NYSE/Nasdaq: CME) and CBOT Holdings, Inc. (NYSE:BOT) today
announced that they have revised the terms of their merger
agreement to provide additional value to all CBOT Holdings
shareholders and a guarantee for holders of Chicago Board Options
Exchange (CBOE) exercise right privileges (ERP). The revised
agreement has been unanimously approved by the boards of directors
of both companies. Under the terms of the revised agreement: -- All
CBOT shareholders will receive a one-time cash dividend of $9.14
per CBOT share, or a total of $485 million. The dividend will be
declared by CBOT before the close of the merger and paid
immediately prior to the merger, after all the conditions to the
merger have been satisfied. For a CBOT full member who holds the
minimum 27,338 shares of CBOT Class A common stock currently
required to exercise the ERP, the $9.14 per share dividend equates
to $250,000 of cash value. -- In addition, eligible holders of ERPs
will have additional choice regarding their exercise rights: - The
right to continue as a class member in the CBOE lawsuit with all of
its substantial upside recovery potential and a guarantee, even if
the lawsuit is lost or settled, of up to a $250,000 payment; or -
For members who do not want to pursue the lawsuit, the right to
sell their ERP to the corporation for $250,000 payable following
the closing of the merger. -- CME eliminated the $15 million cap on
out-of-pocket costs (including attorneys' fees) incurred with
respect to its obligations to prosecute the ERP litigation and
defend against any other proceedings brought to challenge the
exercise rights. -- A five-person committee of the Board of CME
Group, including three CBOT directors, will have veto authority
over rule changes, including member fees, that could materially
impair the business opportunities of CBOT members. This veto
authority will extend to the 2012 Annual Meeting of Stockholders,
an extension of three additional years from the original merger
agreement. The combination of these enhancements substantially
increases the value of the transaction for all CBOT Holdings
shareholders and CBOT members. "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," said CME Executive Chairman Terry
Duffy. "CME and CBOT are committed to completing our merger and
delivering superior value to shareholders of both companies. 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." "We believe that the special dividend, the unique
ERP guarantee and the enhancements to governance and member rights
further improve the overall value of a merger with CME for all
shareholders and members," said CBOT Chairman Charlie Carey. "A
combination with CME will create the most extensive and diverse
global derivatives exchange, transforming global derivatives
markets and creating efficiencies for customers and members while
delivering significant benefits to shareholders." "We believe the
CBOE/ICE agreement fails to offer fair value to CBOT members," said
Craig Donohue, CME Chief Executive Officer. "The cash dividend of
$9.14 per share, or a total of $485 million, will provide immediate
liquidity to all CBOT shareholders. For a CBOT full member who
holds 27,338 CBOT Class A shares, this dividend equates to
approximately $250,000 in respect of those shares. Additionally,
our "Exercise Right" guarantee is superior because it allows ERP
holders to either cash out early or remain in the litigation with a
minimum $250,000 value guarantee and the potential for capturing
the substantial upside, including the potential right to share
equally with CBOE regular members in any CBOE demutualization. For
illustrative purposes, if CBOE's fair market value is $3.3 billion
and ERP owners and CBOE members share pro rata, the value of an ERP
share is about $1.5 million." "From a strategic and operational
perspective, the combination with CME provides outstanding
opportunities for growth, efficiencies and innovation, creating the
leading global derivatives exchange in all major asset classes and
one of the world's most liquid marketplaces," said CBOT President
and CEO Bernard W. Dan. "We look forward to working with the CME
management team to complete this transaction and to achieve the
tremendous potential we believe the combined company will provide
to its shareholders, customers and members." One-Time Cash Dividend
Under the terms of the agreement, CBOT will declare a one-time
dividend of $9.14 per share of CBOT Holdings Class A common stock
to shareholders of record as of a date prior to the close of the
merger. The dividend will be conditioned upon the satisfaction or
waiver of all of the conditions to the merger and paid immediately
prior to the closing of the merger. In addition, the parties have
agreed that appraisal rights will be available to CBOT Holdings
shareholders in connection with the merger in accordance with
Delaware law. ERP Guarantee Under the terms of the revised
agreement, effective immediately following the closing of the
merger: -- An ERP holder who is also a B-1 member on May 29, 2007,
the record date for the merger vote, may sell that ERP to the Board
of Trade of the City of Chicago, Inc. (Exchange) for $250,000 in
cash within 45 days of the closing of the merger. In the event that
a final resolution in the ERP litigation results in eligible ERP
holders receiving or retaining cash or property with a combined
fair market value less than $250,000 per ERP, the CBOT will pay
such eligible ERP holders the difference between $250,000 and the
value of their recovery. This preserves for ERP holders a
substantially higher payment, as well as trading rights if the
litigation process produces a higher recovery, including a full
interest in CBOE. CME and CBOT noted that their guarantee for ERP
holders did not require approval of CBOE or CBOE members, or the
court or the class plaintiff in the pending Delaware litigation.
The ICE/CBOE proposal, by contrast, would require the approval of
CBOE members, the court and the class plaintiff in the litigation,
creating significant uncertainty regarding, if or when, the
proposed ERP consideration would be paid. The ICE/CBOE proposal is
designed to extinguish the rights of ERP holders without the
opportunity to preserve their rights to a full participation in a
CBOE demutualization. CME has also eliminated the $15 million cap
on out-of-pocket costs (including attorneys' fees) incurred by CBOT
with respect to its obligations to prosecute the CBOE litigation
and defend against any other proceedings brought to challenge the
exercise rights. Governance and Member Rights A five-person
committee of the Board of CME Group, including three CBOT
directors, will have veto authority over rule changes, including
member fees, that could materially impair CBOT member opportunity.
This veto authority will extend to the 2012 Annual Meeting of
Stockholders, an extension of three additional years from the
original merger agreement. In addition, the terms of the revised
merger agreement extend the period during which designated CBOT
directors serve on the Board of CME Group to the 2012 Annual
Meeting of Stockholders. Tender Offer The terms of the revised
merger agreement continue to include an obligation on the part of
CME to make a $3.5 billion cash tender offer at $560 per share
shortly following the closing of the merger. Both CME shareholders
and CBOT shareholders that receive CME stock in the merger will be
eligible to participate in the tender offer. If the stock trades
through the $560 level, CME is committed to return excess capital
to shareholders. CME and CBOT Holdings will hold an investor call
and webcast today at 9:15 a.m. Eastern Time / 8:15 a.m. Central
Time to discuss this morning's announcement. Presentation materials
can be accessed through the investor relations section of CME's Web
site at http://www.cme.com/. To participate in the call, dial (800)
500-0311. International callers should dial (719) 457- 2698. No
passcode is necessary. About CME CME (http://www.cme.com/) is the
world's largest and most diverse financial exchange. As an
international marketplace, CME brings together buyers and sellers
on the CME Globex(r) electronic trading platform and on its trading
floors. CME offers futures and options on futures in these product
areas: interest rates, stock indexes, foreign exchange,
agricultural commodities, energy, and alternative investment
products such as weather, real estate and economic derivatives. CME
is a wholly-owned subsidiary of Chicago Mercantile Exchange
Holdings Inc. (NYSE:CMENASDAQ:CME), which is part of the Russell
1000(r) Index and the S&P 500(r) Index. About the CBOT As one
of the leading global derivative exchanges, the Chicago Board of
Trade provides a diverse mix of financial, equity and commodity
futures and options-on-futures products. Building on its 159-year
history, the CBOT continues to advance into the future using the
strength of deep liquidity, market integrity and member-trader
expertise. Using superior trading technology in both electronic and
open-auction trading platforms, the CBOT provides premier customer
service to risk managers and investors worldwide. For more
information, visit our website at http://www.cbot.com/.
Forward-Looking Statements This press release may contain
forward-looking information regarding Chicago Mercantile Exchange
Holdings Inc. and CBOT Holdings, Inc. and the combined company
after the completion of the merger that is intended to be covered
by the safe harbor for "forward-looking statements" provided by the
Private Securities Litigation Reform Act of 1995. These statements
include, but are not limited to, the benefits of the business
combination transaction involving CME and CBOT, including future
financial and operating results, the new company's plans,
objectives, expectations and intentions and other statements that
are not historical facts. Such statements are based on current
beliefs, expectations, forecasts and assumptions of CME's and
CBOT's management which are subject to risks and uncertainties
which could cause actual outcomes and results to differ materially
from these statements. Other risks and uncertainties relating to
the proposed transaction include, but are not limited to, the
satisfaction of conditions to closing, including receipt of
shareholder, member, regulatory and other approvals on the proposed
terms; the proposed transaction may not be consummated on the
proposed terms; uncertainty of the expected financial performance
of the combined company following completion of the proposed
transaction; the combined company may not be able to achieve the
expected cost savings, synergies and other strategic benefits as a
result of the proposed transaction; the integration of CBOT's
operations with CME's may not be successful or may be materially
delayed or may be more costly or difficult than expected; general
industry and market conditions; general domestic and international
economic conditions; and governmental laws and regulations
affecting domestic and foreign operations. More information
regarding other risks to the parties performance can be found in
their filings with the Securities and Exchange Commission (SEC),
including Item 1A of each of their Annual Reports on Form 10-K for
the fiscal year ended December 31, 2006 and their most recent
Quarterly Reports on Form 10-Q. Copies of said filings are
available online at http://www.sec.gov/ or on request from CME or
CBOT. You should not place undue reliance on forward- looking
statements, which speak only as of the date of this press release.
Except for any obligation to disclose material information under
the Federal securities laws, CME and CBOT undertake no obligation
to release publicly any revisions to any forward-looking statements
to reflect events or circumstances after the date of this press
release. Additional Information CME and CBOT have filed a
definitive joint proxy statement/prospectus with the SEC in
connection with the proposed transaction. The parties intend to
file a supplement to the joint proxy statement/prospectus and mail
the supplement to their respective shareholders in connection with
the special shareholder meetings. This press release is not a
substitute for the definitive joint proxy statement/prospectus, as
supplemented, or any other documents CME and CBOT have filed or
will file with the SEC. Investors and security holders are urged to
read the definitive joint proxy statement/prospectus, as
supplemented, and any other relevant documents filed or to be filed
by CME or CBOT because they contain or will contain important
information about the proposed transaction. The definitive joint
proxy statement/prospectus is, and the supplement thereto and other
documents filed or to be filed by CME and CBOT with the SEC are or
will be, available free of charge at the SEC's Web site
(http://www.sec.gov/) or from Chicago Mercantile Exchange Holdings
Inc., Shareholder Relations and Membership Services, 20 South
Wacker Drive, Chicago, Illinois 60606, Attention: Beth Hausoul or
from CBOT Holdings, Inc., Attn:InvestorRelations, at 141 West
Jackson, Chicago, Illinois 60604. CME and its directors, executive
officers and other employees may be deemed to be participants in
the solicitation of proxies in connection with the proposed
transaction. Information regarding CME's directors and executive
officers is available in CME's proxy statement for its 2007 annual
meeting of stockholders, dated March 17, 2007. Additional
information regarding the interests of such potential participants
is available in the definitive joint proxy statement/prospectus, as
supplemented, and the other relevant documents filed with the SEC.
CBOT and its directors, executive officers and other employees may
be deemed to be participants in the solicitation of proxies in
connection with the proposed transaction. Information regarding
CBOT directors and executive officers is available in CBOT's proxy
statement for its 2007 annual meeting of stockholders, dated March
29, 2007. Additional information regarding the interests of such
potential participants is included in the joint proxy
statement/prospectus and the other relevant documents filed with
the SEC. Statements included in this press release relating to the
ICE offer reflect the views of CME's and CBOT's management. This
document shall not constitute an offer to sell or the solicitation
of an offer to buy any securities, nor shall there be any sale of
securities in any jurisdiction in which such offer, solicitation or
sale would be unlawful prior to registration or qualification under
the securities laws of any such jurisdiction. No offering of
securities shall be made except by means of a prospectus meeting
the requirements of Section 10 of the U.S. Securities Act of 1933,
as amended. CME-G DATASOURCE: Chicago Mercantile Exchange Holdings
Inc. CONTACT: CME Contacts - Media: Allan Schoenberg,
+1-312-930-8189, Anita Liskey, +1-312-466-4613; or Chuck Burgess of
The Abernathy McGregor Group, +1-212-371-5999; or Investors: John
Peschier, +1-312-930-8491; or CBOT Contacts - Media: Maria C.
Gemskie, +1-312-341-3257; Harlan Loeb of Financial Dynamics,
+1-312-861-4703; or Investors: Deborah Koopman, +1-312-789-8532 Web
site: http://www.cme.com/
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