CME and GFI terminate merger agreement

January 30, 2015 04:51 PM

After a months-long bidding war, CME Group Inc. and GFI Group Inc. announced late Friday that they terminated their previously-announced merger agreement.

“Preliminary results from the GFI shareholder meeting held earlier today in New York indicate that GFI shareholders did not approve the proposed merger,” said a CME Group release. “As a result, the parties determined that terminating the merger agreement and related transactions was in the best interest of their respecting companies and shareholders at the time.”

Earlier today, Bloomberg reported that GFI shareholders had voted against the merger agreement.

Last week CME Group increased its offer to $5.85 per share in a mix of stock and cash but did not improve on it despite BGC Partners raising its all-cash offer to $6.10.  

“We believe that the proposed CME-GFI management merger failed by an overwhelming margin,” BGC CEO Howard Lutnick said in a BGC release. “Since a rejection by GFI shareholders would end any possibility of the CME-GFI management merger being completed, our tender offer is the only viable option for GFI stockholders seeking to maximize the value for their shares,” he added.

GFI remains committed to exploring “strategic alternatives with any and all interested parties to maximize shareholder values for all shareholders,” according to a release.

“While we are disappointed that the CME merger was not approved by our shareholders, we appreciate their view and will work tirelessly to find a strategic alternative that offers the Company’s shareholders the chance to maximize the value of their investment,” GFI Group Executive Chairman Michael Gooch said in a release.

Gooch issued two open letters this week urging GFI Group stockholders to vote to approve the CME offer, despite recent recommendations against it from proxy advisory firms International Shareholders Service and Glass, Lewis, and Co. 

In his letters, Gooch called BGC’s offer “a highly conditional hostile tender offer.”

“You can opt for a ‘bird in the hand,’ with CME,” Gooch wrote, “or hold out for ‘BGC in the bush.’”

BGC claimed GFI ownership was not looking out for shareholders as it was purchasing a brokerage unit in the original deal. The Management Consortium chose to forego approximately $40 million and instead pass that money down to shareholders in the amended CME agreement.

Gooch framed this as a benefit, while BGC Partners CEO Howard Lutnick criticized it sharply in an open letter of his own.

“The actions of the GFI board have demonstrated remarkably poor corporate governance and raise serious key questions with respect to their fiduciary obligations to GFI shareholders,” Lutnick wrote.

BGC’s offer is good until Feb. 3. Whether GFI stockholders take the alternate option remains to be seen.

About the Author

Jaime Toplin is the editorial and web intern at Futures Magazine. She also contributes content to Hard Assets and the Alpha Pages. Jaime is a senior at Northwestern University's Medill School of Journalism, studying magazine and online journalism as well as legal studies. She is the VP of Public Relations for her student government and works for a Medill professor who researches digital media.