CME Denies It’s in Talks for $16 Billion Takeover of Cboe

(Bloomberg) -- CME Group Inc. said it’s not in talks to acquire Cboe Global Markets Inc., whose shares surged after the Financial Times said it was the target of a $16 billion takeover approach.

“CME Group denies all rumors that is in conversations to acquire Cboe Global Markets,” the company said in an emailed statement Wednesday. “The company has not had any discussions with Cboe whatsoever. While the company does not typically comment on rumor or speculation, today’s inaccurate information required correction.”

The Financial Times reported that CME, the world’s largest futures-exchange operator, offered 0.75 of its own shares for every Cboe share, citing three people familiar with the talks. That would value Cboe shares at about $150 each, according to the report, or roughly 21% higher than Tuesday’s closing price. The Financial Times didn’t immediately provide a comment.

Cboe was little changed at $124.26 as of 3:19 p.m. in New York, after earlier surging as much as 12% on the report. CME fell 2.6%.

An acquisition by CME would be one of the final pieces in the consolidation of U.S. exchanges. The buyouts started in 2007, when CME acquired its crosstown rival, the Chicago Board of Trade, for $9.6 billion, and then followed with the $9.8 billion purchase of Nymex Holdings Inc. a year later. In 2013, Intercontinental Exchange Inc. bought NYSE Euronext for $10.3 billion, giving it a valuable European derivatives franchise and the iconic New York Stock Exchange.

CME’s denial was so strong that a deal is unlikely for now, Kevin Heal, an analyst at Argus Research Corp., said in an interview.

Even if an acquisition were to eventually materialize, regulatory approval would be an issue, according to Heal. “Getting through those hoops would not be easy because it would take out another exchange operator,” he said.

Two Powerhouses

Thomas Caldwell, chairman of Caldwell Securities Ltd. in Toronto, also questioned the regulatory response to a tie-up between the two Chicago markets. 

“Regulators tend to view things as either illegal, immoral or fattening,” Caldwell, who owns Cboe shares, said in a telephone interview. 

A deal between CME and Cboe has long been discussed in the industry as logical and maybe even inevitable. It would unite two powerhouses of trading in Chicago and beyond, and put CME’s S&P 500 futures and Cboe’s S&P 500 options -- wildly popular products that are exclusive to their exchanges -- under one roof. That shared role in equity derivatives has been cited for years as a reason for the companies to link up.

CME would also pick up the VIX, a Wall Street benchmark for risk, as well as Cboe’s U.S. and European stock exchange, which play major roles in both regions. But that would also mean CME would pick up more serious regulation from the Securities and Exchange Commission, which oversees stock trading in the U.S. At the moment, CME mostly just has to deal with the U.S. Commodity Futures Trading Commission.

While the denial from CME was strong, “it doesn’t mean they can’t go back to Cboe and approach them in the future, even if they haven’t done so formally in the past,” Oppenheimer & Co. senior research analyst Owen Lau said.

“The assets are complementary and the Chicago locations are similar, so I wouldn’t be surprised if an announcement gets made down the road,” he said. “But for now, it’s clear they are saying it isn’t happening. At least for now.”

 

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