Chicago-based CME eyes Nymex purchase

CME Group Inc., the world's largest derivatives exchange, hopes to broaden its reach by buying energy and precious metals mart Nymex for $11 billion, the companies said Monday.

The proposal keeps up a breakneck pace of consolidation among U.S. and global financial exchanges, many of which have staged successful initial public offerings in recent years.

Under the terms being discussed, Chicago-based CME would pay Nymex Holdings Inc. shareholders $36 in cash and 0.1323 of a CME common share for each Nymex share owned.

Based on CME's closing price Friday, the preliminary offer values Nymex shares at roughly $119.22 each, an 11 percent premium to Nymex's closing share price on Friday.

"We expect this deal to be a positive to both CME and Nymex shares," said Edward Ditmire, analyst at Fox-Pitt Kelton in New York.

CME Group was created in July 2007 when Chicago Mercantile Exchange Holdings bought the Chicago Board of Trade, then its biggest rival among U.S. futures exchanges. "There is massive consolidation going on in the industry. This is another great sign of that," said Michael Henry, senior executive at Accenture's Capital Markets practice in New York.

Nymex, or the New York Mercantile Exchange, is the world's largest physical commodity futures exchange with more than 130 years of trading history. It went public in November 2006.

The exchange trades an array of energy contracts, including crude oil, gasoline, natural gas and electricity, and precious metals such as gold, silver and copper through its Comex division.

With Nymex in its stable, CME Group would control about 95 percent of U.S. futures and futures on options volume.

Nymex's products have little overlap with CME's strengths in interest rates, foreign exchange, stock index and agricultural commodities such as grains and livestock. So many analysts expect little pushback from the U.S. Department of Justice, which would need to approve the deal.

Still, some see the deal as another move toward "disintermediation" in which giant exchanges attempt to cut out the middlemen, the brokerage firms, and perform more of the firms' functions internally.

Nymex has a spirited competitor in energy derivatives, Atlanta-based Intercontinental Exchange Inc., or ICE. Over the counter energy derivatives trading is also thriving.