CME and Kansas City Board of Trade: More Consolidation in Exchanges

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CME Group Inc. (NASDAQ: CME) is leading yet another consolidation of the global stock and commodity exchanges. Today came word that it was acquiring the 156-year old Kansas City Board of Trade. The exchange is said to be the leading futures market for hard red winter wheat and CME is paying the exchange some $126 million in cash to the members.

The KCBT will also apparently make a special distribution of excess cash to members upon the CME buyout's closing. A committee will advise on the hard red winter wheat contract terms and conditions for at least three years. It will also maintain the historic KCBT trading floor in Kansas City for at least six months.

Today's news is not out of left field. The KCBT has been working on sale for much of this year. What is not clear is whether the NYSE Euronext, Inc. (NYSE: NYX) and/or the IntercontinentalExchange, Inc. (NYSE: ICE) were bidding or not. The KCBT did say that it was "considering a number of qualified interested parties" but went on to say that the CME Group was the best fit (likely upon the economics of the deal!/?). The KCBT's board of directors has unanimously approved the transaction and expects that the deal will close later this year after the approval of KCBT shareholders and regulatory bodies.

A $126 million buyout might not sound like that much, but this is an exchange that much of the public does not even know exists. The CME Group has a market cap of $19 billion now that it has merged with the CBOT. Elsewhere, the market value of IntercontinentalExchange is $9.5 billion and the market value is just over $6 billion.

JON C. OGG

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