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ICE and CBOE enter agreement

Agriculture.com Staff 05/30/2007 @ 8:54am

Intercontinental Exchange, Inc. (NYSE:ICE) and the Chicago Board Options Exchange (CBOE) today announced that they have entered into an exclusive agreement valued at $665 million.

In the event that a proposed merger of ICE and CBOT Holdings is realized, today's agreement resolves the issues relating to the CBOE exercise rights of full CBOT members, according to an ICE press release.

Under the agreement:

-- Full Members of the Chicago Board of Trade holding CBOE exercise rights would receive $500,000 in value for each right, or up to $665.5 million in the aggregate, to resolve the issues relating to the exercise rights in a manner that would make clear that following a merger between ICE and CBOT, Full Members of CBOT holding the required interests would be compensated for the loss of the exercise right.

-- Consideration would be paid equally by CBOE and ICE, with holders of exercise rights being entitled to receive cash and/or debt securities convertible into both stock of the newly combined ICE/CBOT Holdings and common shares of CBOE after its demutualization.

-- The exclusive agreement between ICE and CBOE is contingent on the completion of the proposed merger of ICE and CBOT Holdings.

-- ICE and CBOE have entered into an agreement in principle for a broad commercial partnership, including technology and product development, and access to the distribution capabilities of each exchange.

"This strategic agreement would resolve existing litigation and uncertainty for both CBOT and CBOE members, while unlocking substantial value for CBOT members, many of whom remain CBOT Holdings stockholders. It also frees CBOE to pursue a demutualization for the benefit of its members, and importantly, accelerates ICE's ability to deliver value in options products for our stockholders and customers," said Jeffrey C. Sprecher, Chairman and CEO of ICE.

William J. Brodsky, CBOE Chairman and Chief Executive Officer, said, "We are pleased that ICE sought to address the exercise right issue and we are delighted to participate in a proposal that provides significant benefits for each organization.

Meanwhile, CME and CBOT Holdings, Inc. (NYSE: BOT) earlier this month announced that they have revised the terms of their definitive merger agreement.

In addition, the CBOT Holdings Board of Directors and its special transaction committee have unanimously reaffirmed their recommendation that CBOT Holdings shareholders vote in favor of the merger agreement with CME. That vote is scheduled for July 9, 2007.

The CBOT Holdings Board also concluded that the unsolicited proposal submitted by IntercontinentalExchange, Inc. (ICE) was not superior to the revised CME transaction.

The CBOT officials have read the agreement with interest, but have had no communication with either ICE or CBOE officials, according to Debbie Baratz, CBOT's communication director.

"We look forward to seeing the details of the announcement to make a measured evaluation," Baratz said.

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