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CME GROUP INC. 8-K Report, Material Agreement (Jul 23, 2008)

Filed July 23, 2008For Securities:CME

Summary

CME Group Inc. (CME) filed an 8-K on July 22, 2008, reporting an amendment to its merger agreement with NYMEX Holdings, Inc. (NYMEX). This amendment, dated July 18, 2008, primarily addresses terms related to NYMEX Class A memberships and executives' compensation packages. Key changes include a cash payout of $750,000 per NYMEX Class A membership for qualifying owners who waive certain rights. While members retain trading rights and the seat market is preserved, several other rights, including revenue sharing, will be eliminated and replaced with commitments like maintaining the NYMEX trading floor and fee differentials. The amendment also facilitates a reduction of approximately $30 million in merger-related expenses, including executive severance payments, which is a positive development for the overall transaction cost. Investors should note that these changes require a supermajority vote from NYMEX Class A members.

Key Highlights

  • 1Amendment No. 2 to the Merger Agreement between CME Group and NYMEX Holdings, Inc. was executed on July 18, 2008.
  • 2NYMEX Class A membership holders will receive $750,000 per membership upon closing, provided they execute a waiver and release.
  • 3NYMEX Class A members retain rights to use or lease memberships for trading and the NYMEX seat market is preserved.
  • 4Substantially all other rights of NYMEX Class A members, including revenue sharing, are eliminated and replaced by new commitments.
  • 5CME Group committed to maintaining the NYMEX trading floor in New York until at least December 31, 2012.
  • 6The amendment reduces certain change-in-control severance and tax gross-up payments for NYMEX Holdings executives, totaling approximately $30 million in aggregate merger-related expenses.
  • 7Implementation of these changes requires a 75% affirmative vote from NYMEX Class A membership owners.

Frequently Asked Questions

This 8-K filing reports on Amendment No. 2 to the Agreement and Plan of Merger between CME Group and NYMEX Holdings, Inc. The amendment modifies terms related to NYMEX Class A memberships and executive compensation tied to the merger.

Qualifying NYMEX Class A membership holders who agree to waive certain rights will receive $750,000 per membership. While trading rights and the seat market are preserved, most other rights, such as revenue sharing, will be eliminated and replaced with new commitments from CME Group.

Yes, the amendment includes a reduction in certain change-in-control severance and tax gross-up payments for NYMEX Holdings executives, as well as other merger-related expenses, resulting in an aggregate reduction of approximately $30 million.

The implementation of the changes outlined in the amendment requires the affirmative vote of owners of 75% of the outstanding NYMEX Class A memberships. Additionally, specific waiver and release agreements are needed from the membership holders receiving the cash payout.