Now that members of the New York Mercantile Exchange have finally approved CME Group’s $8.4 billion takeover, they want the Chicago futures giant to take steps to boost CME’s sagging stock price.
The first move could come in the next few days as CME chief Craig Donohue and Chairman Terry Duffy install a new executive to replace current Nymex Chairman Richard Schaeffer and CEO Jim Newsome.
Many veteran Nymex members have strongly criticized the two leaders for what they claim was poor management despite shepherding the company through its initial public offering in 2006.
In an interview with The Post yesterday, Donohue declined to name candidates for the job, but sources familiar with the matter said Christopher Edmonds, a former senior executive of commodities brokerage giant ICAP, is a top choice.
Nymex shareholders have taken a beating since CME first announced an interest in buying the world’s largest energy exchange earlier this year. The stock is off 50 percent along with other financial companies, which has cut nearly $3 billion off the price of the Nymex takeover.
The huge price decline infuriated Nymex members, who threatened to block the deal unless CME raised its price. But Donohue and Duffy held steady, refusing to increase the offer despite a slight bump in the price that members received for their trading privileges.
“We spent a tremendous amount of time with Nymex members educating them about the value of the deal,” Donohue said. “Traders are straight talking people and they want to be talked to in a straight way.”
Donohue convinced outspoken Nymex member Robert Sahn to support the deal last week after persuading him that CME could take Nymex’s dominance in energy and metals trading to a new level.
“Under this management team and their business plan, this is going to be like a Ferrari in terms of earning money,” Sahn said yesterday. “Oil and metals trading is growing tremendously and the potential for this stock is enormous.”
Donohue said many Nymex shareholders believe CME’s stock is cheap and are now electing to take shares instead of cash in the deal. “They see it as a way to recover some of what they’ve lost since the deal was first announced,” he said.
Following official closure of the deal on Friday, CME will begin a 12-month integration process that could result in $60 million of cost savings, although many analysts believe that is a conservative estimate.
In the short term, CME hopes to boost its stock price through a $1.1 billion share buyback plan and a special $5-per-share dividend issued after the deal closes.
Long term, Donohue plans to grow by expanding CME and Nymex’s customer base around the world. Right now only about 16 percent of trades on the exchange are coming from overseas.
CME shares fell slightly yesterday to close at $336.55 while Nymex gained 19 cents to close at $80.14.
