CME Said to Approach Deutsche Boerse for Merger Talks

Bloomberg: CME Group Inc. (CME), the world’s largest futures exchange, has approached Deutsche Boerse AG to consider beginning talks on a merger, according to four people familiar with the situation.

CME contacted the Frankfurt-based exchange at the end of last year, beforeIntercontinentalExchange Inc. (ICE) announced plans to buy NYSE Euronext (NYX) on Dec. 20, said the people, who asked not to be identified as the information is private. Deutsche Boerse, which had its takeover of NYSE Euronext blocked by European regulators a year ago, is hesitant about entering talks, the people said.

A combination of Chicago-based CME and Deutsche Boerse would unite the biggest futures exchanges in the U.S. and European markets. CME shares have rallied 15 percent this year, giving it a market capitalization of $19.4 billion. Deutsche Boerse climbed 1 percent through Feb. 22, bringing its value to 9 billion euros ($11.9 billion). The Germany company’s stock rallied 9.3 percent to 51.04 euros at 12:56 p.m. in Frankfurt today, a 10-month high.

The companies met again last month to debate whether to begin formal takeover talks and haven’t yet made a decision, the people said. No offer has been made, nor have terms been discussed, they said.

CME Expansion

Frank Herkenhoff, a spokesman for Deutsche Boerse in Frankfurt, and Allan Schoenberg, a spokesman for CME in London, declined to comment.

CME, like IntercontinentalExchange, has expanded in the past decade through deals, buying the Chicago Board of Trade and New York Mercantile Exchange. It unsuccessfully tried to purchase the London Metal Exchange last year. CME also approached NYSE about a deal with its derivatives business, two people familiar with the situation said last month.

Interest-rate futures are CME’s biggest business, while Deutsche Boerse’s Eurex derivatives-trading venue hosts the benchmark euro-bund future.

Intercontinental Exchange’s $8.2 billion agreement to buy NYSE Euronext has ignited a fresh round of talks for exchange companies -- already the subject of $50 billion in attempted deals in the past three years.

Japan Exchange

Japan Exchange Group Inc. (8697), created by the merger of the nation’s two biggest bourses, may consider an alliance or merger with an overseas exchange, Chief Executive Officer Atsushi Saito said on Feb. 5. The company would consider talking with CME, Deutsche Boerse,BM&FBovespa SA (BVMF3), the operator of Latin America’s biggest trading venue, or Korea Exchange Inc., Saito said.

Hong Kong Exchanges & Clearing Ltd. (388), the world’s largest bourse by market value, completed the $2.2 billion takeover of the London Metal Exchange in December. Singapore Exchange Ltd. (SGX), the operator of Southeast Asia’s biggest stock market, has held talks to join London Stock Exchange Group Plc (LSE) by buying a stake in LCH.Clearnet Ltd., Europe’s largest clearinghouse, according to three people familiar with the negotiations.

Nasdaq OMX Group Inc. (NDAQ) held preliminary talks with Carlyle Group LP (CG) about going private before the discussions broke down on price, a person with knowledge of the matter said earlier this month.

Deutsche Boerse and its rivals have seen volumes drop following the global financial crisis of 2008. Traditional exchanges have also lost market share to new trading venues such as Bats Chi-X Europe.

Deutsche Boerse last week said it set up a committee to consider opportunities in Asia as the operator of the Frankfurt stock exchange focuses on the region to drive growth amid declining volumes.

The company said fourth-quarter earnings before interest and taxes fell 20 percent to to 185.2 million euros as securities trading slowed. Deutsche Boerse trimmed its dividend on Feb. 5 and said it would cut about 250 jobs to reduce costs.

reporter on this story: Nandini Sukumar in London