Tuesday, October 17, 2006

Merc and CBOT to merge

The rumors are finally true. Today the Merc (CME Holdings) announced that it will acquire the Chicago Board of Trade (CBOT Holdings, as it is formally known these days) in a deal that combines the two largest U.S. futures exchanges.

We've often heard speculation that the longtime rivals would merge, but until the two firms went public, it never seemed like it would come to pass. Now that CME has grown in size and stature as a publicly traded corporation, they have the motivation and the means to swallow up their smaller rival, CBOT Holdings.

With a market cap of over $18 billion at today's trading price, CME is valued at over twice the $8.1 billion CBOT Holdings (BOT) commands at today's share price. CBOT Holdings has jumped over 13% in response to the buyout, and CME is up 3% as well.

Looks like everyone seems pleased about the deal. I hear from my father, a longtime CBOT member and trader, that the Merc will abandon their building and set up trading operations in CBOT's roomy digs. Now the combined entity will benefit from the Merc's forward thinking brass, and the combination of CME and CBOT's excellent offerings. Salud.

For more, see Reuters news update.