Terms of the proposed transaction are as follows:
* ICE would issue 1.42 ICE shares for each CBOT Class A common share, valued at $187.34 per CBOT share based on yesterday's closing price of ICE shares. This represents a 12.8% premium to CBOT's current share price, and a 39.3% premium to its share price on October 16, 2006, the day before announcement of its merger agreement with the Chicago Mercantile Exchange (NYSE:CME. The $187.34 per share value also represents a premium of 10.5% to the current value of the pending CME/CBOT transaction to CBOT shareholders.
* CBOT shareholders would own approximately 51.5% of the combined company and, in addition to receiving a premium, would participate in the significant strategic and financial benefits of the combination.
* ICE is committed to preserving the heritage of CBOT, bringing its brand and expertise forward on a global scale as the derivatives marketplace expands.
* ICE will commit to the same terms as the CME offer regarding CBOT's open auction markets and will protect and grow the CBOT metals complex.
* ICE proposes to enter into a transaction on terms similar to those in the current CBOT merger agreement with CME. Flexibility in the potential legal structure of the transaction exists to provide CBOT members who hold Chicago Board Options Exchange exercise rights a preferred structure to preserve these rights.
* Unlike a combination of CME and CBOT, ICE believes no significant antitrust or other regulatory risks exist in a combination of ICE and
CBOT and a transaction could be completed quickly, thereby delivering both near-term and long-term benefits to all stakeholders of both ICE and CBOT.
Based on publicly available information, ICE estimates transaction benefits of at least $240 million annually upon the full integration of ICE and CBOT. In addition to identified expense rationalization and the revenue growth opportunities available to the combined company, significant clearing benefits also exist as ICE could provide a fully operational clearing solution for CBOT's products upon termination of CBOT's existing clearing agreement with CME in January, 2009. Accordingly, ICE believes the combination would be accretive to cash earnings per share within 18 months of closing. With access to CBOT and its management, ICE expects to identify additional opportunities for the combined company.
"This is an extremely compelling combination for Chicago Board of Trade and IntercontinentalExchange shareholders, trading members, customers, clearing firms, employees, the derivatives industry and the City of Chicago," said Jeffrey C. Sprecher, Chairman and CEO of ICE. "The CBOT Board of Directors has the opportunity to achieve a transaction that offers a considerable premium to the pending CME transaction and, at the same time, secures the CBOT's position as a leading independent global derivatives complex based in Chicago. The combined company would be extremely well positioned in nearly every high-growth derivatives segment, and would have the platform to capitalize on the many emerging growth opportunities in the dynamic derivatives landscape on a global scale. The transaction we are proposing is clearly superior to a combination with the CME for CBOT's shareholders and other stakeholders."
Since January 1, 2006, the value of ICE shares has increased 348% compared with growth in CBOT shares of 80.5% and in CME shares of 55.5% over the same period. ICE has successfully completed the acquisitions of International Petroleum Exchange and the New York Board of Trade, creating substantial value for the former owners of each organization and delivering exceptional organic growth through innovation and technology.
