Largest futures market to acquire Nymex Holdings

CME Group Inc., the world's largest futures market, has agreed to acquire Nymex Holdings Inc. for $8.9 billion to add benchmark oil and natural gas futures to the contracts it offers.

CME will give shareholders of Nymex, parent of the New York Mercantile Exchange, 0.1323 of its stock plus $36 in cash for each Nymex share they own, the companies said yesterday. The offer values Nymex at $95.54 a share, or 13 percent higher than yesterday's closing price. CME will control 98 percent of U.S. exchange-traded derivatives contracts if it buys Nymex, up from 87 percent now.

The acquisition builds on a two-year partnership between the companies in which Nymex's contracts have traded on CME's Globex electronic-trading platform. CME Group gains a stronghold in trading contracts that set prices on everything from oil and natural gas to U.S. Treasuries. It also will acquire Nymex's over-the-counter business, an area CME has struggled to penetrate in financial futures such as interest rates.

"Nymex and CME are a good fit," Mark Williams, a finance professor at Boston University, said. "Exchanges are in a commodity business, and increased volume is what drives profits."

CME fell $36.85, or 7.58 percent, to $449.20 on the New York Stock Exchange. Nymex dropped $11.04, or nearly 12 percent, to $84.30. CME's decline yesterday shaved almost $500 million from the offer.

CME Group was formed last year when the Chicago Mercantile Exchange bought the Chicago Board of Trade for $11.6 billion, creating the world's largest futures market.

The exchanges likely will combine their clearinghouses, which act to guarantee trades against default, allowing customers such as Wall Street firms and hedge funds that have capital at both markets to consolidate and save money, CME chairman Terrence Duffy said.

"We will be looking to integrate our clearing functions," CME chief executive officer Craig Donohue said on the conference call.

Donohue said he was "confident we'll be successful" in receiving antitrust approval for the purchase from the Justice Department. The companies said the deal should be completed within six to nine months.