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New York Markets After Hours

June 23, 2008, 9:37 a.m. EDT

CME 'sweetens' Nymex offer with buyback, dividend

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By Doug Cameron

CHICAGO (MarketWatch) -- CME Group Inc. /zigman2/quotes/210449693/composite CME +1.86% announced plans Monday for a share buyback and special dividend that effectively sweetens its agreed bid for Nymex Holdings Inc. (NYX).

The world's largest futures exchange operator said it will buy back $1.1 billion in stock over the next 18 months and pay a $5-a-share dividend if its bid for the specialist energy and metals exchange succeeds.

The proposed cash-and-stock acquisition, first announced in late January, has been jeopardized by a slump in CME's share price that cut the indicative sale price by as much as $3 billion to around $8 billion.

The twin moves mirror the CME's tactics during its successful bid last year for the Chicago Board of Trade. A combination of sweetened terms helped sway CBOT members from a rival bid from IntercontinentalExchange Inc. /zigman2/quotes/209108507/composite ICE +1.69% .

CME shares have recovered from their 52-week lows in recent days but remain below the level that some shareholders and Nymex members said was required to secure their support.

The proposed dividend would raise the current purchase price for Nymex stock to $97.11 a share, valuing the company at $9.27 billion. The Nymex deal terms finalized in March calls for its shareholders to receive $36 and 0.1323 shares of CME for each Nymex share.

A group of dissident Nymex shareholders has been pushing for terms above $115 a share, in line with their value in late January. The stock peaked at $142.64 last July but, like other exchanges, has slid with the rerating of the financial sector.

Shares of CME were at $438.27 in recent premarket trading, up from Friday's close of $429.26. Shares of Nymex were unchanged from the previous close of $91.25.

The two exchanges require backing from shareholders and 75% of Nymex members. While there is widespread support from both for combining with the CME, the slide in the deal value had threatened to derail a transaction targeted for closing in the final quarter of this year.

While the CME's actions are expected to bolster its stock price, some shareholders still expect another push by the Chicago exchange to sway remaining opposition.

This could include an increase in the targeted synergies from the combination beyond the annualized $60 million already identified. Such a move could see the cash portion of the CME offer tweaked higher.

CME said Monday it would take on $4 billion in debt to fund the stock buyback and the Nymex deal, above the $3 billion already earmarked for the proposed acquisition. CME had indicated there was ready access to funding in the capital markets.

-Contact: 201-938-5400

/zigman2/quotes/210449693/composite
US : U.S.: Nasdaq
$ 179.53
+3.27 +1.86%
Volume: 1.81M
Sept. 28, 2022 4:00p
P/E Ratio
22.26
Dividend Yield
2.23%
Market Cap
$63.35 billion
Rev. per Employee
$1.35M
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/zigman2/quotes/209108507/composite
US : U.S.: NYSE
$ 93.05
+1.55 +1.69%
Volume: 3.86M
Sept. 28, 2022 4:00p
P/E Ratio
15.57
Dividend Yield
1.63%
Market Cap
$51.10 billion
Rev. per Employee
$1.04M
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