A Cook County judge’s approval Monday of a settlement that ends a dispute over ownership of the Chicago Board of Trade clears the way for the nation’s oldest futures exchange to become a for-profit company.
At that point the Board of Trade could sell shares to the public, and make equity holders in the exchange, where full memberships fetch nearly $1 million, even wealthier.
“This is four years in the coming,” said CBOT Chairman Charles Carey, referring to the court battle that has dragged on since 2000. “It gives us greater flexibility to pursue our business plan to restructure into a for-profit company.”
Carey declined to comment on the exchange’s plans to make a public offering, only to say that the Securities and Exchange Commission must first approve the board’s new structure to become shareholder-owned instead of member-owned.
The court battle involved 2,200 members who hold partial seats at the Board of Trade. They had claimed in a class-action lawsuit brought four years ago that they would be shortchanged as part of the plan to convert the exchange into a for-profit company. Originally, the so-called minority members were to receive 12 percent of the equity in the exchange.
Earlier this year the equity stake was sweetened in a settlement to 22 percent, probably worth hundreds of millions of dollars.
In a written order on Monday, Circuit Court Judge Patrick McGann called the settlement “fair, adequate, and reasonable and in the best interest of all CBOT members and membership interest holders.”
A small group of the 1,402 full members had objected to the settlement.
Garrett Johnson, a lawyer representing the objectors, said he needed to review the judge’s ruling and consult with his clients before deciding whether to appeal.
The objectors had maintained that the settlement creates a forced vote for reorganization on prearranged terms, denying them a “free and uncoerced vote,” said Johnson.
As the court battle ensued, seatholders watched the Chicago Mercantile Exchange go public in late 2002. The Merc’s stock has since more than quadrupled in price, and CBOT members are salivating at their chance to benefit from the public sale of stock.
“It’s a great day for the CBOT,” said Steve Fanady, a trader and minority member, who was one of several members in attendance in McGann’s court Monday. “It means we can move forward as one unit.”
Some members may look to cash in before any potential public offering. Just before the judge’s ruling was issued at 2:30 p.m., a full seat at the exchange sold for $925,000. That was up 5.7 percent from a previous sale price of $875,000.
