CBOE IPO to Raise at Least $292M - Analyst Blog

According to Reuters, on May 18, the final major private options exchange left in the U.S., the Chicago Board Options Exchange (CBOE) unveiled its estimation of raising at least $292 million from the forthcoming initial public offering (IPO), through a regulatory dossier filed in April 2010.

Previously, when the company declared to go public on Mar 11, CBOE had projected the IPO worth $300 million. However, given the ongoing debt crisis in Greece that followed the mysterious plummeting of U.S. stock prices, many IPO deals faced the destiny of being cancelled, postponed or discounted. Hence, CBOE plans to go ahead with its projected plan though currently expecting a reduced price than before.

Founded in 1973, CBOE’s IPO plan had been devised long time ago but it got delayed due to the legal hassle with the members of the former Chicago Board of Trade (CBOT). CBOT is the futures exchange from which the CBOE was originally spun off in 1973 and which was bought by the Chicago Mercantile Exchange Group Inc. (CME) in Aug 2008.

However, the legal dispute on demutualization has been settled and the company is being converted from a member-owned organization to a publicly traded corporation known as CBOE Holdings Inc. The shares of CBOE are expected to commence trading on Nasdaq OMX Group Inc.’s (NDAQ) Global Select Market under the ticker symbol “CBOE” from Jun 15, 2010 onwards.

Accordingly, CBOE expects to dispose of about 9.6 million shares in the IPO, while members and brokers handling the IPO will sell 2.1 million shares, at a minimum of $25 per share. In the mean time, a price band is expected before Jun 1, 2010. Post IPO, the minimum share price would value CBOE at $2.57 billion with shares outstanding worth 102.6 million.

For reference, NYSE Euronext Inc. (NYX) and Nasdaq, the largest owners of U.S. equity exchanges, are valued at $7.51 billion and $3.97 billion, respectively. Another strong peer, CME that owns the world’s biggest futures exchange is worth $20.4 billion.

The exchange has appointed Goldman Sachs Group Inc. (GS) as the underwriting manager, while Bank of America Corp. (BAC), Barclays Capital, a division of Barclays PLC (BCS), Citadel Securities, Citigroup Inc. (C), JPMorgan Chase & Co. (JPM) and UBS Investment Bank, a division of UBS AG (UBS) are the appointed book-runners for the IPO.

Our Take

Despite the ongoing economic turbulence, the CBOE IPO is expected to be accepted by the market on a modest premium because of rumors that CBOE could be an acquisition target for the already strong peers in the industry such as Nasdaq, NYSE, InterContinental Exchange Inc. (ICE) and CME which has already been in informal speculations.

CBOE IPO to Raise at Least $292M – Analyst Blog

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