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CME May Have to Pony Up More Cash for Nymex Deal

 June 24, 2008 09:39 AM

CME Group Inc. (NYSE: CME) announced plans today for a share buyback and special dividend that effectively sweetens its bid for Nymex Holdings Inc. (NYSE: NMX). The world's largest futures exachange said it would institute a $1.1 billion buyback plan over the next 18 months and pay a $5 per share cash dividend if its bid for the energy and metals exchange succeeds.

The proposed acquisition hit some snags due to a slump in CME Group's share price, which has lowered the takeover price by as much as $3 billion to just $8 billion. The buyback and dividend tactic worked wonders the last time CME Group used it during its acquisition of rival Chicago Board of Trade last year. After all, they are great for shareholders!

The original deal calls for Nymex shareholders to receive $36 and 0.1323 shares of CME for each NMX share. The proposed dividend would raise the purchase price for Nymex stock to $97.11 per share, which represents a $9.27 billion overall valuation. However, some investors are still concerned that the deal may fall through.

Many believe that the CME Group may be forced to tweak the cash portion of the deal slightly higher in order to sway the remaining opposition. This is the cause behind the recent rally in the differential between Nymex and CME Group shares that arbitrageurs have been trading for some time now.

Related Companies
NYMEX Holdings, Inc. (NMX)
NYSE Euronext (NYX)
IntercontinentalExchange, Inc. (ICE)
MarketAxess Holdings Inc. (MKTX)
Arbinet-thexchange, Inc. (ARBX)
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