CME Group and the Kansas City Board of Trade (KCBT) today announced they have signed a definitive agreement under which CME Group will acquire the KCBT. Under the terms of the transaction, CME Group will pay $126 million in cash for KCBT. In addition, KCBT will make a special distribution of excess cash to members concurrent with closing.
In an official press release on the announcement, CME Group said it was committed to maintain a committee made up of KCBT market participants to advise on HRW wheat contract terms and conditions for at least three years, and to maintain the historic KCBT trading floor in Kansas City for a period of at least six months.
The board of directors of KCBT unanimously approved the transaction, which is expected to close later this year pending approval by KCBT shareholders and regulators, expiration of the applicable Hart-Scott-Rodino waiting period and completion of customary closing conditions.
"Global agricultural market participants continue to depend on liquid, transparent risk management tools for price discovery in both established and emerging economies," said CME Group Executive Chairman and President Terry Duffy. "Building on two rich legacies, the combination of KCBT Hard Red Winter Wheat products with our deep and liquid CBOT Soft Red Winter Wheat futures and options markets will provide new trading opportunities for market participants around the world -- both on the trading floor and on the screen."
"This transaction creates significant value for customers and shareholders of both companies. While the CBOT and KCBT Wheat contracts are very distinct products with different uses, the ability for producers and commercial participants to hedge their risk in both key benchmarks in one place will produce cross-margining benefits and other capital efficiencies," said CME Group CEO Phupinder Gill.
"Given the increasing operational demands and regulatory requirements, it was deemed beneficial that the KCBT partner with an exchange with the technology, experience, leadership and resources of CME Group," said Steven K. Campbell, KCBT Chairman. "KCBT's flagship HRW wheat product is a logical and valuable addition to CME Group's global grains complex. After considering a number of qualified interested parties, the KCBT's Board of Directors is convinced that the CME Group is the best fit for the long-term goals of our exchange, our product offerings, and in continuing to meet the price/risk management needs of our customers."
CME Group said the addition of HRW wheat upon completion of the transaction will further enhance its "broad agricultural product offering." It states, "HRW wheat is the predominant variety grown in the United States, and is also the leading variety sold through export. Customers around the globe will continue to benefit from access to underlying CBOT and KCBT wheat contracts through the CME Globex electronic trading platform."