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Nymex shareholders approve takeover by CME Group(Chicago Tribune (KRT) Via Acquire Media NewsEdge) CHICAGO _ The Chicago Mercantile Exchange and Chicago Board of Trade once helped the wheat stackers and hog butchers price their work. Now those 19th century institutions will shoulder even more of the global economy's weight, after shareholders of their parent company, the CME Group, approved the deal to buy the New York Mercantile Exchange for $8.2 billion Monday. With this latest merger, the agricultural roots of the Chicago markets have blossomed to include almost every aspect of commerce. Futures contracts influencing how we drive (crude oil), heat our homes (natural gas) and express our wealth (gold) will join offerings that can affect our ability to borrow money (government bonds) and buy overseas goods (foreign currencies). The deal withstood a recent plunge in CME Group stock _ which sliced about $3.3 billion from the merger price _ and resistance from Nymex members, who sought more money. But the CME Group needed to close the deal in order to be the exchange of choice for computerized traders who are spread across continents. "The users today are not just in New York or Chicago, they're truly international," said CME Group Chairman Terry Duffy. "For us to expand into this asset class of energy is extremely important." Acquiring the Nymex brings a diverse mix of products into the CME Group portfolio, buffering the company against the recent volume drop in trading interest rate futures. The merger also provides access to the next financial outpost: over-the-counter contracts that are traded independent of an exchange. The Nymex already has a foothold in this space with its Clearport system for clearing OTC energy contracts. The risk management skills developed through Clearport will be helpful as the CME Group attempts to break into the OTC credit and interest rate markets, said CME Group Chief Executive Craig Donohue. At an industry conference earlier this year, the German-Swiss partnership Eurex and NYSE Euronext-owned Liffe identified the clearing of OTC credit default swaps as the next great opportunity for the exchange industry. "All of the derivatives exchanges in the world, not just here in the U.S., are trying to get the OTC market because it's about five times bigger than the exchange-trade derivatives market," said Michael Henry, an analyst for the consultant Accenture. Through the merger, the CME Group will pick up stakes in the Norwegian futures market Imarex and the recently established Green Exchange, which trades sulfur dioxide and carbon emission credits. Despite the standard pronouncements about how CME Group customers will benefit from greater efficiencies and shareholders from the cost savings of a merger, the deal often appeared near the brink of collapsing. Its outcome depended upon a vote by Nymex members that concluded Monday, since shareholders at both companies were expected to approve the combination. The CME Group needed 75 percent of the 816 Nymex members to endorse the merger. They would surrender their rights to revenue from electronic trading for $750,000 each, under terms that were altered last month when Nymex members balked at receiving $612,000 for their seats. The new terms paid more money and enabled Nymex members to keep their seats, but opposition mounted when members learned two weeks ago that the payment might expose them to a higher tax rate than they expected. (EDITORS: BEGIN OPTIONAL TRIM) About 650 Nymex members _ 80 percent _ voted for the merger, said Nymex Chairman Richard Schaeffer after heavy lobbying by both companies right until the voting deadline. Having to sway members at the last minute was among the obstacles encountered by the CME Group, which also saw the value of its bid decline as its stock fell. Separate from the membership payment was a combination of cash and CME Group stock that initially valued Nymex at $119 a share. But a Justice Department memo raising fears the government might view the CME Group as a monopoly and a meltdown in financial sector stocks in the middle of the process sent shares in the CME Group spiraling to less than half their peak of $714 a share. CME Group shares lost 5.88 percent Monday to close $336.64. That put the cash-and-stock element at $80.54 per share of Nymex, about 50 cents above the Monday close for the Manhattan-based exchange. As the owner or four Nymex seats, Fox Business Network contributor Eric Bolling voted for the merger because of his confidence that CME Group shares will rebound. "It will be a very difficult company to compete with because they'll have a stronghold in what they trade," Bolling said. Some Nymex members noted that the deal was less than perfect, but what motivated them to support it was the chance to replace existing Nymex leadership. "They had no plan, no foresight," said Nymex member Robert Sahn. "CME management is head and shoulders above Nymex management." (END OPTIONAL TRIM) The deal is set to close Friday. ___ (c) 2008, Chicago Tribune. Visit the Chicago Tribune on the Internet at http://www.chicagotribune.com/ Distributed by McClatchy-Tribune Information Services. For reprints, email [email protected], call 800-374-7985 or 847-635-6550, send a fax to 847-635-6968, or write to The Permissions Group Inc., 1247 Milwaukee Ave., Suite 303, Glenview, IL 60025, USA. 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