CME Group Inc. 8-K Summary
Business Context and Reporting Period
This Current Report on Form 8-K, dated August 22, 2008, details the consummation of CME Group Inc.'s acquisition of NYMEX Holdings, Inc. (NYMEX) and the establishment of new financing facilities to support the transaction. The merger became effective on August 22, 2008, resulting in NYMEX Holdings ceasing to exist as a separate entity and becoming a wholly-owned subsidiary of CME Group.
Key Financial Metrics and Capital Structure
- Senior Credit Facility: Entered into a $1.416 billion facility consisting of up to $420.5 million in term loans and up to $995.5 million in revolving loans (expandable to $1.084 billion).
- Bridge Credit Facility: Established a $1.284 billion 364-day revolving loan facility.
- Acquisition Consideration: NYMEX shareholders received a mix of cash and CME Group Class A common stock. Due to proration of the mandatory cash component, shareholders received approximately $7.29 in cash and 0.2164 shares of CME stock per NYMEX share.
- Dividend Declaration: A special dividend of $5.00 per share was declared for CME Group Class A and Class B common stock, payable on October 10, 2008.
Material Changes
The primary material change is the completion of the merger with NYMEX Holdings. NYMEX Holdings common stock has been delisted from the New York Stock Exchange. CME Group has amended its Certificate of Incorporation and Bylaws to reflect the merger. Additionally, the company has significantly increased its debt capacity through the new credit facilities to finance the acquisition, refinance existing NYMEX indebtedness, and fund corporate purposes including the special dividend and stock repurchases.
Outlook, Risks, and Management Commentary
The proceeds from the new credit facilities are designated to finance the merger, pay related fees, refinance NYMEX debt, and provide working capital. The Senior Credit Facility is voluntarily prepayable without penalty. The Bridge Credit Facility is mandatorily prepayable with net cash proceeds from equity issuances, debt issuances (with a $50 million exclusion), and asset dispositions (with a $25 million exclusion). Both facilities include covenants requiring the maintenance of minimum consolidated net worth and limitations on liens, subsidiary indebtedness, and fundamental changes.
Investor Verification Checklist
- Verify the final proration factor and exact cash/stock mix received by NYMEX shareholders as detailed in the August 27, 2008 press release (Exhibit 99.2).
- Review the specific terms of the Senior and Bridge Credit Agreements (Exhibits 10.1 and 10.2) for interest rates, fees, and detailed covenant restrictions.
- Monitor the upcoming filing of pro forma financial information and financial statements of the acquired business, due within 71 days of August 28, 2008.
- Confirm the record date (September 25, 2008) and payment date (October 10, 2008) for the $5.00 special dividend.
- Assess the impact of the new debt load on CME Group's leverage ratios and credit rating.