CBOT, Chicago Mercantile boards OK increased merger offer

By Jennifer Chiou

New York, July 6 - Chicago Mercantile Exchange Holdings Inc. said that its "best and final" merger offer, under which CBOT Holdings, Inc. shareholders will receive an increased number of Chicago Mercantile shares, has been approved by both companies' boards.

Under the newly amended Oct. 17, 2006 agreement, CBOT shareholders will now receive 0.375 of a share, up from 0.35 of a share, of Chicago Mercantile class A common stock for each share of CBOT Holdings class A common stock. In addition, CBOT Holdings representatives will fill 10 of the 30 seats on the combined company's board of directors.

After the transaction is complete, CBOT shareholders will own about 36% of the outstanding shares of the combined company.

In addition, Caledonia Investments Pyt. Ltd., CBOT's largest shareholder, has announced that it will endorse the revised merger agreement.

As already reported, under Chicago Mercantile's revised terms, all CBOT shareholders will receive a one-time cash dividend of $9.14 per share, or a total of $485 million. Eligible holders of Chicago Board Options Exchange exercise right privileges may also choose to continue as a class member in the CBOE lawsuit or sell each exercise right privilege to the company for $250,000.

The terms of the revised merger agreement continue to include Chicago Mercantile's obligation to make a $3.5 billion cash tender offer at $560 per share shortly following the closing of the merger.

On June 14, CBOT said that IntercontinentalExchange, Inc.'s proposal was not superior to a revised Chicago Mercantile merger agreement.

The special meetings of shareholders of Chicago Mercantile and CBOT to approve the transaction and of members of CBOT to approve related matters are scheduled for July 9. If approved, closing is schedule to occur in the following days.

CBOT Holdings operates the Chicago Board of Trade, a Chicago derivatives trading exchange. Chicago Mercantile Exchange is the first publicly traded U.S. financial exchange.

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