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Article Excerpt
Original Source: FD (FAIR DISCLOSURE) WIRE
MARK LANE, ANALYST, WILLIAM BLAIR & COMPANY: Okay. Good afternoon, everyone. Welcome to the Chicago Mercantile Exchange Company presentation.
For those of you that I don't know, I'm Mark Lane. I head the financial services research group at William Blair. I cover the asset managers, brokers, exchanges and all areas of insurance. I'm the research analyst that covers CME.
I also need to tell you that William Blair & Company does have an investment banking relationship with the Company.
We're very pleased to have with us today from the CME Executive Chairman Terry Duffy, CEO Craig Donohue.
Let me first say that, as the world's leading futures exchange, the CME has really distinguished itself as a dominant growth company within financial services, capital markets. Development globally is driving huge growth opportunities for many financial services companies, particularly in the derivatives market. CME's been a prime beneficiary of that. We expect that to continue. They have great diversity. They've been very innovative. They've been able to leverage their integrated platform.
We believe it's an exciting time for the CME. While its core business continues to grow quickly, pursuing some really exciting new business opportunities, FXMarketSpace, credit derivatives. And of course this penny merger with the Chicago Board of Trade should also bring a lot of exciting new opportunities.
With that, I'll turn it over to Terry.
TERRY DUFFY, EXECUTIVE CHAIRMAN, CHICAGO MERCANTILE EXCHANGE HOLDINGS, INC.: Thanks, Mark. Was that quick enough on the information?
Let me thank Mark and also the rest of the William Blair team. Since we began working with William Blair, prior to our IPO, we have been greatly impressed with your in-depth research coverage and your efforts of your institution sales force. And we appreciate the insights provided to us by your investment banking team that you mentioned. And it's been led by [Jim Hickey] and [Chris Carter]. And I know Chris is here and, Chris, we appreciate all your hard work. And Jim has done a marvelous job for us also.
I also want to point out Jack Sanders, a former chairman of our exchange, is also here tonight -- this afternoon. And Jack, probably a customer of Blair, too?
JACK SANDERS: (Inaudible - microphone not accessible.)
TERRY DUFFY: We're very pleased to see such a large turnout here. And see a lot of familiar faces, and I appreciate your continued interest in the CME.
During our presentation, Craig will review our recent highlights of our business, as well as future avenues for continued growth.
First, however, I'd like to briefly comment on our proposed merger with the Chicago Board of Trade. The CME and CBOT are committed to completing our merger and delivering superior value to the shareholders and customers at both of our companies.
As you can see from this first slide, our merger will create the largest exchange in the world. Together, we will be well positioned to leverage significant new growth opportunities in the rapidly changing marketplace.
Since we announced the original agreement last October, both the CME and CBOT have delivered strong financial performance and volume growth, which is underscoring the strategic rationale for bringing these two great institutions together. We believe the CME/CBOT merger is clearly the best strategic alternative and creates significant value in the long run.
First, we offer greater immediate, long-term growth potential, driven by both our existing suite of complementary products and new opportunities to serve the large over-the-counter markets related to asset classes we both currently trade.
CME Group will provide trading and clearing services across all major product categories, including interest rates along the entire U.S. yield rate -- the whole yield rate curve. Excuse me. Equity derivatives, foreign exchange, agricultural commodities, energies, metals and alternative products.
Furthermore, we expect competition to continue to intensify, and the firms with the largest scale and reach will be able to capitalize on the greatest number of opportunities. The CME and CBOT are operationally superior to other alternatives, and can grow, which is very important, from day one.
Second, the revenue and cost synergies associated with our transaction are higher and more certain, and will be realized faster than any other potential transaction. After more than 8 months of detailed integration planning, we have identified cost synergies of at least $150 million. We also have been able to quantify potential revenue and gross synergies of at least $75 million, net of related expenses.
Third, our transaction has minimal execution risk due to the capacity and reliability of both our Globex trading platform and our clearinghouse. We have a strong track record of integration execution...
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