Exchange Merger Dance Continues; Nymex Open to Opportunities
Following Nymex Holdings Inc.'s extremely successful initial public offering (IPO) late last week, the company's chairman left the field open, responding that future mergers were not out of the question, possibly even with its largest rival Atlanta-based IntercontinentalExchange (ICE).
According to Dow Jones News Service, Nymex Holdings Chairman Richard Schaeffer said his company was open to discussions on mergers when asked about a possible union with ICE. "We look at all opportunities," Schaeffer told Dow Jones. "If one comes where one and one make three, we'll take a look at it.
"We're open for discussions from this day further ... and we're looking at all alternatives," he added.
Calls to Nymex and ICE were unreturned as of press time.
"All I heard was that the Nymex head wouldn't rule anything out," said Tom Saal, a broker with Commercial brokerage Corp. in Miami. "I don't know if there is anything more to it. Now that they are a publicly traded company they can be acquired or they can do the acquiring."
If such a merger were consummated, Saal said the markets could possibly return to the way they used to be. "If Nymex and ICE did get together we would have the old Nymex," Saal said. "Right now, we have market fragmentation where liquidity is in three different places. It is at ICE, on the Nymex floor and through Nymex's contracts on the Chicago Mercantile Exchange's Globex system. It has caused liquidity to be separated, which has created these larger intra-day price swings. If they got together, I don't know what form it would take. Whether they would maintain three different trading arenas or bring them all together is beyond me."
An ICE and Nymex union would follow the recent consolidation trend within the exchange sector. In September, ICE announced that it has agreed to acquire the New York Board of Trade (NYBOT), a more than 100-year-old open outcry exchange for sugar, coffee, cocoa, cotton and other commodities and financial products, for $1 billion (see Daily GPI, Sept. 18).
ICE announced Monday that the U.S. Securities and Exchange Commission has declared effective the its registration statement with respect to the proposed merger with NYBOT, which has scheduled a special meeting of its members for Dec. 11, 2006 to vote on the transaction.
"In our pursuit to bring continued innovation and scale to our rapidly growing global commodity marketplace, this acquisition provides mutual benefits of a diverse product offering, technology and additional clearing opportunities to our respective market participants," said ICE CEO Jeffrey C. Sprecher. "We believe this transaction will provide a significant platform for future growth and, importantly, represents significant value for our customers and shareholders."
ICE has said that NYBOT's markets will be enhanced by ICE's electronic trading platform, while ICE will be able to utilize NYBOT's commodities clearinghouse. Upon closing, NYBOT will become a wholly-owned subsidiary of ICE and will be a for-profit corporation.
Not to be outdone by ICE, the Chicago Mercantile Exchange (CME) reported in October that it will acquire cross-town competitor Chicago Board of Trade (CBOT) in an $8 billion transaction that will form a $25 billion global derivatives exchange (see Daily GPI, Oct. 18).
In order to keep up with ICE's successful electronic exchange, Nymex inked an agreement with CME in April under which CME became the exclusive electronic trading services provider for Nymex's energy futures and options contracts (see Daily GPI, April 7). Some market watchers saw Nymex's IPO as a leveling of the playing field in the commodity exchange arena. ICE launched a very successful IPO last November (see Daily GPI, Nov. 17, 2005).
A Nymex-ICE deal would be significant in that it would pair two of the largest futures exchanges together, but it would also be joining two companies that have butted heads a number of times over the past few years as the race for energy exchange supremacy has heated up. Nymex's move into regular session electronic trading through the CME deal only increased the competition with ICE (see Daily GPI, Feb. 16; April 11; May 12).
Nymex Holdings, which operates the 134-year-old New York Mercantile Exchange, in its first day as a publicly traded company last Friday soared to more than double its IPO price, opening up 103% higher at $120 per share before climbing to a high of $152 on the New York Stock Exchange (see Daily GPI, Nov. 20). The newly public company's share price finished Friday at $132.99. On Monday, shares of the company were trading in the $130 to $140 range.
Coming in above expectations, Nymex Holdings raised $383.5 million last Thursday through its much anticipated IPO. The company and its private stockholders sold a combined 6.5 million shares through the offering, which had been expected to debut at between $54 and $57 per share, but achieved a $59 price (see Daily GPI, Nov. 15).
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