With a Saturday deadline looming in its exclusive negotiations, CME Group Inc. is hammering out details to buy the New York Mercantile Exchange in a deal complicated by falling stock prices and some internal disagreements on both sides.
Since merger discussions began in late January, CME Group shares have fallen by about $118, to a close of $506.85 Thursday, chopping the original $11.5 billion offer for Nymex by $1.3 billion.
The drop has made it difficult to determine the value of Nymex, which lost more than 16 percent of its market cap during the same period. Weeks into negotiations, CME Group Chief Executive Craig Donohue felt the company’s chairman, Terry Duffy, was willing to pay too much for Nymex, according to a futures-clearing firm executive familiar with the matter.
And Nymex members question whether CME Group will pay enough for the metal and energy market. They want to ensure CME Group would honor an existing guarantee that members receive 10 percent of revenue from electronic trading if more than 90 percent of the volume for a product occurs through a computer screen.
Nymex members have majority approval on whether the clearinghouses of the two futures markets can join forces, said a source with knowledge of the members’ position.
A Nymex official close to the negotiations said the company must balance the interests of its membership with those of its institutional investors because the majority of shareholders must approve any eventual deal.
The negotiations are revising CME Group’s proposed offer of $36 in cash and 0.1323 of a share of stock for each Nymex share, plus a maximum payment of $500 million for all 816 Nymex memberships.
Many wondered if a deal might be announced Thursday because Donohue and his Nymex counterpart, James Newsome, appeared together at the Futures Industry Association conference at a Florida resort.
Between cigars and stories, traders wondered if the two exchanges might duplicate the drama of the previous year’s conference when IntercontinentalExchange Inc. bid on the Chicago Board of Trade. The Chicago Mercantile Exchange ultimately bought the CBOT for $11.3 billion to form CME Group.
But both CEOs kept mum, with Donohue answering “no comment” to merger questions.
Representatives of CME Group and Nymex couldn’t be reached for comment.
And competitors for Nymex, which handles its electronic trading through CME Group’s platform, have yet to emerge at the conference.
Eurex CEO Andreas Preuss declined to say whether the German-Swiss derivatives exchange would make a counterbid.
“There is no room for an opportunity not to be looked at,” Preuss said.
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jboak@tribune.com
