IntercontinentalExchange, Inc. (NYSE: ICE) today sent the following letter to Chicago Board of Trade (NYSE: BOT) stockholders and members urging them to reject the proposed sale to CME:
June 27, 2007
DON'T BE SOLD SHORT BY YOUR BOARD AGAIN -- STOP CME FROM BUYING CBOT ON THE CHEAP CME'S SUPPOSEDLY ENHANCED OFFER HAS BEEN RAISED BY LESS THAN THE INCREASE IN CBOT'S 2007 EARNINGS OUTLOOK VOTE NO ON CME'S CLEARLY INFERIOR OFFER ON JULY 9
Dear Chicago Board of Trade Stockholder/Member:
Your Board has agreed to sell CBOT to CME in a transaction that significantly undervalues your company. Rather than match ICE's higher offer, CME has yet again low-balled you with a supposedly enhanced offer that doesn't reflect the true value of your company -- and will be paid for by CBOT's own improved earnings prospects. Instead of putting their money on the table, CME has continued to wage a campaign of low-road rhetoric in an attempt to scare you into voting for their inferior transaction.
THE CHOICE IS CLEAR: ICE HAS CONSISTENTLY OFFERED YOU MORE VALUE FOR CBOT
By voting NO on July 9th, you can stop this inferior deal and send a message to your Board that you want it to consider ICE's superior proposal.
CME'S "INCREASED" BID IS BEING PAID FOR BY CBOT'S OWN IMPROVING EARNINGS PROSPECTS
Before ICE made its competing bid, the CBOT Board had agreed to sell your Exchange to the CME in a transaction that was then worth $151.28 per CBOT share. Since then, CBOT's consensus EPS estimates have risen by 25% for 2007 and 22% for 2008. Yet CME has only increased its original bid by 22%: 16% on May 11 with a higher exchange ratio, and 6% on June 14 through a contingent special dividend. And you wouldn't have gotten even this apparent increase from the CME without ICE's superior proposal. Over the same period, CME's 2007 and 2008 consensus EPS estimates have increased by just 2% and 3%, respectively. It's a sweet deal for the slow-growing CME -- but a bad deal for you.
ICE HAS A DEMONSTRABLY STRONGER CURRENCY
CME has consistently tried to talk down the value of ICE's stock by dismissing ICE's superior growth rate and strong fundamentals. The fa. Th. The fact is that ICE has been growing rapidly and profitably, both organically and through strategic acquisitions -- which is reflected in its strong share price appreciation. Yet ICE shares continue to trade at a lower multiple than CME which indicates future upside. The CME doesn't want you to realize that its growth rate is lower, its multiple is higher, and its stock is less liquid.
ICE CREATES MORE VALUE:
- Since ICE proposed to merge with CBOT in March, CBOT shares are up by $34.33 per share, increasing value for CBOT stockholders by $1.8 billion.
- Since going public, ICE shares are up 460% versus only 37% for the CME over the same period.
- ICE's stock offers greater liquidity: average dollar volume traded in 2007 is $583 million per day for ICE vs. only $375 million per day for CME.
- In response to member requests for a cash option, ICE enhanced its all-stock offer to include a $2.5 billion cash election.
- ICE worked with the CBOE to craft a win-win solution to the exercise right issue - only after ICE took this innovative action did CME attempt to copy ICE with an inferior version of the ICE/CBOE proposal to CBOT members.
ICE HAS CONTINUED TO DEMONSTRATE VISION & LEADERSHIP:
- Quickly and successfully integrated the NYBOT acquisition, generating record trading volume
- Acquired the exclusive license for Russell Index futures - these are longtime CME-traded products
- Partnered with NGX to offer NGX's contracts on ICE's platform and bring NGX's capabilities for physical settlement of energy contracts to the U.S.
- Announced the acquisition of ChemConnect's trading business
- Announced the acquisition of Winnipeg Commodity Exchange and its leading canola futures product
ICE's management is committed to the success of an ICE/CBOT merger, and will apply to the combined company the innovation and leadership that has made ICE the fastest growing derivative exchange in the world. An ICE/CBOT combination is an important step in creating the world's leading derivative exchange. ICE is committed to continue innovating and creating new markets instead of relying solely on the protection of large market positions in developed products.
INTEGRATION RISK IS A RED HERRING -- JUDGE THE FACTS FOR YOURSELF
Rather than paying you what CBOT is worth, CME and your Board have attempted to push through their below-market transaction by attacking an ICE/CBOT merger as risky and a threat to your franchise and livelihood. Let's look at the facts:
- In 2006, the ICE system was available 99.99% of the time, among the best records in the industry.
- The ICE platform is available 7 days a week, 23 hours a day.
- ICE currently averages 27 milliseconds for a round-trip futures trade and expects to improve to 7 milliseconds by August. A CME round trip averages 31 milliseconds.
- Multiple distribution points make ICE the world's most accessible trading platform.ICE is built on new - not legacy - technologies, yielding greater cost efficiencies, high reliability, performance, speed and functionality. All at the lowest possible cost, which is critical for competitiveness in global markets.
- The previous integration of CBOT clearing into the CME common clearing link was complicated, but was accomplished in only nine months. It is disingenuous of CBOT and CME to claim we will be unable to integrate these platforms in a timely fashion.
Why would ICE jeopardize over $10 billion of market capitalization if a merger with CBOT were truly risky?
ICE's senior management has a lot of skin in the game. We own over 2.8 million ICE shares, or more than 4.1% of the Company, and are personally invested in the success of ICE and a combined ICE/CBOT. Would ICE be pursuing this combination if we were not completely confident in our ability to integrate and grow a combined ICE/CBOT?
In sharp contrast, the combined ownership of CME by all 30 CME executive management and Board members is 356,797 shares, or only 1.0% of CME. The CEO and Chairman of CME together beneficially own all of 81,910 CME shares, or just 0.2% of CME, and most of these are options.
PRESERVE YOUR RIGHT TO OBTAIN FAIR VALUE FOR YOUR EXCHANGE! VOTE "AGAINST" THE CME/CBOT TRANSACTION
If you want to protect your opportunity to receive more value for your shares through the ICE proposal, we urge you to reject the undervalued CBOT sale to CME. A distinguished institution such as CBOT, its stockholders, and its members deserve better.
On behalf of the ICE Board and management team, thank you for your continued support.
Jeffrey C. Sprecher
Chairman and Chief Executive Officer
VOTE AGAINST THE CME PROPOSAL TODAY!
Even if you have already returned a proxy you have every right to change your vote. Only your latest dated vote will count. We urge CBOT Stockholders to vote AGAINST the CME's below-market offer.