Nymex Confirms Takeover Talks; May Fire 150 Employees

Discussion in 'Wall St. News' started by rubibond007, Aug 22, 2007.

  1. Aug. 22 (Bloomberg) -- Nymex Holdings Inc., owner of the world's largest energy exchange, may be acquired as it seeks to expand in Europe and add to its metals and oil contracts.

    Chairman Richard Schaeffer said discussions are at an early stage and any transaction would have to be at a ``meaningful premium'' to the current share price, according to a PRNewswire statement. The stock, which yesterday rose 2.6 percent to $118.78, has dropped 4.2 percent this year.

    Exchanges worldwide are merging as electronic trading brings together stocks, bonds, currencies and commodities on one computer screen. Nymex Holdings, which owns the New York Mercantile Exchange, may fire as many as 150 employees and sell its headquarters in Manhattan, which would have a value of about $500 million, the statement said.

    More mergers and acquisitions are likely in the energy and commodity exchange industry, Liz Bossley, chief executive of London-based consultant Consilience Energy Advisory Group Ltd., said in a telephone interview today. ``There's a proliferation of exchanges out there.''

    Nymex Holdings is exploring a sale to NYSE Euronext, CME Group or Deutsche Boerse AG, two people involved in the talks said in June. In today's statement, Nymex said it was in talks with ``certain parties regarding a potential business combination,'' without naming the parties.

    Potential Combination

    ``A potential business combination could result in cost savings of up to $250 million, as well as potential revenue synergies from better distribution in Europe,'' Nymex said.

    Heiner Seidel, a spokesman for Deutsche Boerse in Frankfurt, declined to comment today.

    In April, NYSE Group Inc. bought Euronext NV for $14.6 billion and Deutsche Boerse agreed to buy New York-based International Securities Exchange for $2.8 billion.

    The Nymex said it made its disclosure after Schaeffer and Chief Executive Officer James Newsome talked earlier yesterday with unidentified institutional investors and a Deutsche Bank analyst.

    Last month, Schaeffer told investors the company planned ``significant reductions'' in expenses this quarter, and cited the exchange's floor-trading as an area for cuts.

    Changing Headquarters

    Electronic trading of securities and commodities is presenting exchanges with opportunities for reducing real estate costs. Floor trading of Nymex contracts decreased 52 percent in the second quarter compared with a year earlier, reflecting the decision to list them on CME Group Inc.'s Globex electronic system.

    Nymex officials held talks to relocate to the Wall Street headquarters of NYSE Euronext, two people familiar with the matter said Aug. 6. They've also met builders and looked at land near the waterfront area of Jersey City.

    The exchange moved to its 15-floor lower Manhattan headquarters in 1997. It previously rented space in the World Trade Center two blocks away.

    Nymex has been slower to adopt electronic trading than its main energy rival, Intercontinental Exchange Inc., whose London- based ICE Futures unit scrapped floor-trading in April 2005, moving all transactions on to electronic screens.

    Some Deutsche Boerse investors are wary of potential mergers and on May 11 the German exchange's chief executive officer, Reto Francioni, told shareholders that he would consult them if he wanted to make a big acquisition.

    His comments in May came after Atticus Capital wrote to Deutsche Boerse saying its purchase of International Securities Exchange Holdings may hurt shareholders. Atticus was one of a group of shareholders who ousted Francioni's predecessor, Werner Seifert, over a planned takeover of London Stock Exchange Plc.