For more than two hours Thursday in a packed hotel conference room, a crowd of several hundred hard-nosed traders questioned, criticized, confronted and occasionally praised the man who wants to buy the Chicago Board of Trade.
Whether Jeffrey Sprecher, chairman and chief executive of IntercontinentalExchange Inc., won over enough CBOT members at the meeting, which had many more listening in by phone, remains to be seen.
Sprecher is challenging the Chicago Mercantile Exchange’s bid to merge with the CBOT, and while his offer is more generous, the CBOT board of directors prefers the Merc’s offer.
Sprecher made some points emphatically clear.
“The Chicago Board of Trade is going to be headquartered in Chicago, period,” Sprecher said, after earlier giving an answer that could have been interpreted as equivocal about the future location of the exchange if Atlanta-based ICE is victorious.
For obvious reasons, a Chicago home for CBOT is vital for floor traders who buy and sell futures contracts face to face.
At other times Sprecher declined to answer a question, but in doing so gave a hint of what he may be thinking.
One trader asked if Sprecher was ready to attempt a hostile takeover of the CBOT if its directors continue to refuse his offer.
“Honestly I can’t answer that,” Sprecher replied. “We would not want necessarily to lay out a road map as to how we may proceed.”
He suggested that the traders, who hold much of CBOT’s stock, put pressure on the directors to accept his offer. Encouraging shareholder discontent with management is a critical component of any hostile takeover.
Sometimes Sprecher provoked laughter from a gathering of people with a deadly serious interest in the many millions of dollars at stake in the merger.
One man, who counted his time at CBOT in decades rather than years, said he would like Sprecher’s offer to include cash, not just stock in ICE, as the offer stands now.
“I’m rather old,” the man explained.
“I’m aging up here,” the 52-year-old Sprecher replied.
The laughter turned to cheers and applause when Sprecher said that if the shareholders want some cash in what is now a stock-for-stock trade, he would give them some money.
Both the Merc and ICE are offering their stock in exchange for stock held by CBOT members and other shareholders, so the value of the deal varies by the trading day. In recent weeks ICE’s offer has often been worth $25 or more a share higher than the Merc’s offer.
But the Merc and CBOT already share efficient back-office functions, which are of critical importance to traders. And the Merc offers a highly respected electronic trading platform, Globex, which is attractive to many traders.
A reliable and familiar way to do business is an important selling point for Tim Jacobs, a trader for 23 years.
“I would like to see [CBOT] go to the Merc,” Jacobs said. “It’s an easy switch.”
Trader Noel Blue sees the merger in very different terms. She likes ICE’s meteoric success with electronic trading and its rapid growth over the past decade.
While CBOT has grown rapidly as well, it has not moved to electronic trading as quickly as some exchanges.
“I’m very pro-ICE,” Blue said. “The board of trade is kind of conservative or prehistoric.”
In an effort to reassure traders, Sprecher spoke at some length about ICE’s successful integration with exchanges in several previous mergers. But he did not deny that there is some danger in combining two companies.
“Is there integration risk? Yes.” Sprecher said. “Every merger has risk.”
Both the CBOT and the Merc had little response to Sprecher’s remarks, saying they contained little that was new and that a Merc merger was safer than a merger with ICE.
Many traders were also critical of a deal announced Wednesday. The Chicago Board Options Exchange, in a long-running legal dispute with CBOT over trading rights, had joined ICE in offering each CBOT member $500,000 in cash or stock as a settlement.
Traders complained that the settlement was far too low. Sprecher said they had a choice: take some hard cash now or take their chances in court for years to come in the hope of getting more.
The take-it-or-leave-it answer did not provoke laughter or applause.
Whatever the results of Sprecher’s direct appeal to traders, Mark Mendelson, one CBOT member, seemed to come away impressed.
He said he worries about problems that might arise with a merger with ICE. And he said he respects CBOT’s top management.
“I have tremendous confidence in Charley Carey,” Mendelson said, referring to CBOT’s chairman.
But after listening to Sprecher, Mendelson said he had developed an opinion of him as well.
“He seemed to have enough integrity that I believe what he was saying,” Mendelson said.
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rmanor@tribune.com
