CME says it's bidding $11 billion for Nymex
Technology already links the exchanges. Such mergers are sweeping the industry.
NEW YORK - Word that financial-exchange operator CME Group Inc. is in talks to acquire Nymex Holdings Inc. doesn't come as a surprise to many observers, because their computers have been in talks for a while now.
CME Group, which is the result of last year's combination of the Chicago Mercantile Exchange and the Chicago Board of Trade, already provides an electronic-trading platform for Nymex products. The relationship could make a combination easier to carry out.
CME Group said yesterday that it was in talks to buy Nymex for about $11 billion in cash and stock and that the companies were in a 30-day period of exclusive negotiations. CME Group is considering an offer of $36 per share plus 0.1323 share of its stock for each share of Nymex Holdings. At $119.22 per share, the deal values Nymex, which runs the New York Mercantile Exchange, at $11.07 billion.
As electronic trading takes a larger role worldwide, technology has become an important arbiter of whether a merger will live up to its promise.
"One of the things that we have been noticing is that the technology platform is becoming a very important part of these equations," said Michael Henry, an exchange expert for consulting firm Accenture Ltd.
While the shared technology could make it easier for a CME-Nymex deal, any exchange merger brings substantial technological changes.
And while a merger could be somewhat "more straightforward" for CME and Nymex, "it's not plug-and-play by any means," he said.
Speculation about a possible tie-up between CME Group and Nymex is not new, and the pressure for all exchanges to combine and cut costs to stay competitive has been growing.
Henry compares the mergers sweeping the exchange business to the rush of deals seen 10 to 15 years ago among banks. Even in cases where a company could be paying too much for a rival, the number of players is shrinking, and those that don't acquire risk being taken over, he noted.
CME Group's exchanges host trading of contracts that allow investors to bet on anything from interest rates to gold to corn.
The New York Mercantile Exchange specializes in trading of energy and metals contracts and has partnered with CME to list some contracts on CME's electronic exchange.
Nymex shares jumped $9.34, or 8.7 percent, to close at $116.50, while CME shares closed down $4 to $625.
"You have something that's already working," said Cubillas Ding, a senior analyst in London at the financial research and consulting firm Celent. He said because Nymex already uses some CME technology it makes it likely that the companies can work past potential integration problems.