CME Group is considering postponing the shareholder meeting on its $8.4 billion deal with the New York Mercantile Exchange after a last-minute revolt by some members of the energy market threatened to kill the merger, according to several sources familiar with the matter.
Pushing back the meeting, which is scheduled for Monday, would give the CME time to rework the tax treatment of a special $750,000 payout it has agreed to give each Nymex member as part of the deal.
In order for the merger to go through, 75 percent of Nymex’s 816 members must vote to approve it – 205 can stop the transaction.
CME executives were meeting behind-the-scenes in New York yesterday with influential Nymex members including Mark Fisher, Robert Sahn and Gary Glass to try to salvage the deal, sources said.
The members have privately vowed to vote against the transaction unless the CME retools the deal so that the payout can be treated as capital gains instead of “ordinary income” for tax purposes. Treating the payout as ordinary income would lower its value to about $472,000 each after taxes.
The group of Nymex members plans to present CME executives with several proposals that will not increase the cost of the deal, but allow the members to obtain the tax treatment they want, sources said.
Still, materially changing the merger would require a new shareholder vote and delay closing the deal – something the CME has been loath to do.
Sources familiar with the CME’s thinking said, as of yesterday, they believed there were enough votes to approve the merger, but it was still too early to tell the outcome and they did not rule out postponing the meeting.
While a substantial number of Nymex members have already submitted their votes for the deal, they can still change them, sources said.
Shareholders of Nymex common stock grew nervous yesterday after fearing that members would block the deal. Under the agreement, shareholders receive $36 and 0.1323 share of CME stock for each Nymex share.
Nymex shares closed down 23 cents yesterday to $76.67. The value of the deal, as of yesterday’s close, was $80.78.