Cbot voters may shun CME bid

Australian fund manager Caledonia (Private) Investments holds a 6.5% stake in CBOT, and said on Thursday that it would vote against the CME’s $9.97 billion offer.

"We think it is a low bid," Caledonia managing director William Vicars told Reuters in an interview. "We are not commenting on whom we agree with. At the moment what the CME has bid isn't attractive to us," Vicars said.

His comments follow the Cbot’s decision earlier this week to reject a revised proposal from Intercontinental Exchange (ICE), deeming it as inferior to the CME bid. The battle for hearts and minds has intensified in the weeks leading up to vote as ICE and CME have sent countless letters and memos to Cbot members urging them to approve their respective offers and reject the competitor.

Cbot shareholders are known to prefer the idea of being bought by their cross town rival, partly because they perceive that deal to hold fewer execution risks and more growth opportunities than ICE’s offer. Yet speculation is growing that they will hold out for a better bid from the CME, making the prospect of the bidding war continuing into August and September increasingly likely, according to sources close to the exchange.

CME is offering 0.35 share for each CBOT Holdings Inc. share in a deal valued Tuesday at $9.97 billion, not including a $9.14-a-share dividend that would be paid from CBOT before closure of the deal.

The value of the hostile offer for the Chicago Board of Trade from the Intercontinental Exchange passed the $12bn mark at one stage during June. Vicars argues that Cbot could command $11.4 billion, citing trading and earnings that are growing faster than the CME's.

There is a concern that Caledonia, along with other smaller opposing shareholders, could use their influence to foil the CME plan. The fund manager of approximately A$3.5 billion ($3 billion) in Australian and global stocks is a known activist shareholder. Last year, it was instrumental in getting the chief executive of the Sydney futures exchange operator, SFE Corp. made head of the company that acquired it, Australian stock exchange operator ASX Ltd. Caledonia still holds stake in ASX.