Is Nymex at last going to succeed at reeling in a suitor? The exchange has long been trying to get a hand in the consolidation game going on amongst its global peers.
Last summer, Nymex was rumoured to be making eyes at the Chicago Mercantile Exchange, while the latter was still fighting Intercontinental Exchange for the Chicago Board of Trade. It was also trying to illicit interest from NYSE, replete with the recently won Euronext, and Deutsche Borse (which had bought the International Securities Exchange after being spurned by just about everyone else.)
It was all starting to look a little indiscriminate. Nymex was as recently as last month pretty much pronouncing that it remained open to all and any offers.
On Monday though, Nymex looked to have leapt past the first date stage and be close to formalising an engagement. It said in a statement made jointly with CME Group that the two were in preliminary talks on a $11bn merger, which would see Nymex shareholders receive $36 in cash and 0.1323 of a CME share for each Nymex share held - or about $119.2 a share based on Friday’s CME close.
Shares in CME Group rose 2.4 per cent on the news on Monday, as investors digested the chance to add the world’s largest physical commodities exchange to the CME family creating one of the largest markets for derivatives in the world.
The talks were in the “early stages” the exchanges cautioned and the terms of any future deal could prove to be “materially different” than those announced today.
But the CME has always been seen as a frontrunner to buy Nymex. Its energy strategy has been centred on a 10-year alliance with the energy exchange, which runs through to 2016. Nymex, which is in competition with electronic-led rival Intercontinental in the global energy trading market, now lists oil, gas and metals contracts on the CME’s electronic platform.
The move has sparking surging volumes as trading has shifted onto the screen - but has raised questions over the viability of the size of Nymex’s trading floor and the future of its NY headquarters. CME Group said on Monday that it expected to maintain “trading floors in the New York City metropolitan area.”
The race to build a derivatives business was accelerated by the deal between CME and CBOT - the creation of a derivatives powerhouse has pushed others to prioritise acquisitions over organic growth to try to stay abreast with the competition.
ICE was left looking exposed after its failure to win CBOT from CME. If Nymex is taken off the table by that market leader, ICE may look a must-have to one of other exchanges groups aiming to bolster their presence in derivatives, like NYSE Euronext.
