Chicago Merc sweetens offer for CBOT

NEW YORK (CNNMoney.com) -- The Chicago Mercantile Exchange upped its offer for crosstown rival Chicago Board of Trade by 16 percent Friday and added cash to what had been an all-stock offer, prompting CBOT to again endorse the combination with the Chicago Merc rather than an unsolicited offer from the IntercontinentalExchange.

Shares of all three companies rose in morning trading following the announcement, with shares in the CME (Charts) posting about a 6.5 percent gain through early afternoon trading, CBOT Holdings (Charts) shares rising 2.7 percent and shares of the IntercontinentalExchange (Charts), also known as ICE, rising about 4 percent.

The deal would now be worth $9.2 billion based on Thursday's closing price, or $9.8 billion with the gain in CME shares Friday. That still puts it almost $1 billion below the value of the offer from ICE.

But the statement from two Chicago exchanges said that CBOT's board concluded that offer by Atlanta-based ICE is not superior to the revised Chicago Merc transaction.

Under the new terms of the deal, CBOT Holdings shareholders will receive 0.35 share of Chicago Mercantile Exchange Holdings Class A common stock for each share of CBOT Holdings Class A common stock.

CME also agreed to make a cash tender offer for up to $3.5 billion in common stock of the combined company, or approximately 12 percent of the combined company's outstanding shares, at a fixed price of $560 per share, open to current CBOT shareholders.

"No question about it: there is hugely broad support for a CME-CBOT combination from the shareholders and members of both exchanges," said Terry Duffy, CME's chairman, said in a conference call with reporters.

Duffy said it was "speculation at best" on whether CME's original, lower bid - the terms of which were set in October - would have succeeded in a vote with CBOT members.

ICE issued a statement Friday afternoon that said it was reviewing its options.

"ICE continues to believe the combination of CBOT and ICE offers CBOT shareholders and members greater immediate and long-term value as well as better growth prospects than its acquisition by CME," said the ICE statement.