SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
Current Report
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): February 7, 2007
CBOT HOLDINGS, INC.
(Exact name of Registrant as specified in its charter)
| Delaware | 001-32650 | 36-4468986 | ||
| (State or other jurisdiction of incorporation or organization) |
(Commission File Number) | (I.R.S. Employer Identification No.) |
141 West Jackson Blvd.
Chicago, Illinois 60604
(Address, including zip code, of principal executive offices)
Registrant’s telephone number, including area code: (312) 435-3500
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the Registrant under any of the following provisions:
| x | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
| ¨ | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
| ¨ | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
| ¨ | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
Item 8.01 Other Events
CBOT Holdings, Inc. (the “Company”) is furnishing presentation materials included as Exhibit 99.1 to this report pursuant to Item 8.01 of Form 8-K which were used at a February 7, 2007 meeting with certain members of the investment community. The Company is not undertaking to update this presentation. This report will not be deemed an admission as to the materiality of any information herein (including Exhibit 99.1).
Important Merger Information
In connection with the proposed merger of CBOT Holdings, Inc. (“CBOT”) and the Chicago Mercantile Exchange Holdings Inc. (“CME”), the parties have filed relevant materials with the Securities Exchange Commission (“SEC”), including a joint proxy statement/prospectus regarding the proposed transaction.
INVESTORS ARE URGED TO READ THE JOINT PROXY STATEMENT/PROSPECTUS REGARDING THE PROPOSED TRANSACTION, BECAUSE IT CONTAINS IMPORTANT INFORMATION. Investors are able to obtain a free copy of the joint proxy statement/prospectus, as well as other filings containing information about CBOT and CME without charge, at the SEC’s website (http://www.sec.gov). Copies of the joint proxy statement/prospectus can also be obtained when available, without charge by directing a request to CBOT Holdings, Inc., Attention: Investor Relations, at 141 West Jackson, Chicago, Illinois 60604 or calling (312) 435-3500.
CBOT, CME and their respective directors and executive officers and other members of management and employees may be deemed to be participants in the solicitation of proxies from CBOT shareholders in respect of the proposed transaction. Information regarding CBOT directors and executive officers is available in CBOT’s proxy statement for its 2006 annual meeting of stockholders, dated March 29, 2006. Additional information regarding the interests of such potential participants is included in the joint proxy statement/prospectus and the other relevant documents filed with the SEC. This document shall not constitute an offer to sell or the solicitation of an offer to buy any securities, nor shall there be any sale of securities in any jurisdiction in which such offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of any such jurisdiction. No offering of securities shall be made except by means of a prospectus meeting the requirements of Section 10 of the Securities Act of 1933, as amended.
Forward-Looking Statements
Certain statements in this document and its attachments may contain forward-looking information regarding CBOT, CME and the combined company after the completion of the transactions that are intended to be covered by the safe harbor for “forward-looking statements” provided by the Private Securities Litigation Reform Act of 1995. These statements include, but are not limited to, the benefits of the business combination transaction involving CBOT and CME including future financial and operating results, the combined company’s plans, objectives, expectations and intentions and other statements that are not historical facts. Such statements are based upon the current beliefs and expectations of the management of CBOT and CME and are subject to significant risks and uncertainties. Actual results may differ from those set forth in the forward-looking statements.
The following factors, among others, could cause actual results to differ from those set forth in the forward-looking statements: the ability to obtain governmental approvals of the transaction on the proposed terms and schedule; the failure of CBOT shareholders or CME shareholders to approve the transaction; the risk that the businesses will not be integrated successfully; the risk that the cost savings and any other synergies from the transaction may not be fully realized or may take longer to realize than expected; disruption from the transaction making it more difficult to maintain relationships with customers, employees or suppliers; competition and its effect on pricing, spending, third-party relationships and revenues; social and political conditions such as war, political unrest or terrorism; general economic conditions and normal business uncertainty. Additional risks and factors are identified in CBOT’s filings with the SEC, including its Report on Form 10-K for the fiscal year ending December 31, 2005 which is available on CBOT’s website at http://www.cbot.com.
You should not place undue reliance on forward-looking statements, which speak only as of the date of this document. Except for any obligation to disclose material information under the Federal securities laws, CBOT undertakes no obligation to release publicly any revisions to any forward-looking statements to reflect events or circumstances after the date of this document.
Item 9.01 Financial Statements and Exhibits
| (c) | Exhibits: |
| 99.1 | Presentation dated February 7, 2007 |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
| CBOT HOLDINGS, INC. | ||||
| Date: February 7, 2007 | By: | /s/ Bernard W. Dan | ||
| Name: | Bernard W. Dan | |||
| Title: | President and Chief Executive Officer | |||
INDEX TO EXHIBITS
| Exhibit Number |
Description | |
| 99.1 | Presentation dated February 7, 2007 |
 CBOT
Holdings, Inc. Credit Suisse Financial Services Forum February 7, 2007 Bernard Dan, President and Chief Executive Officer Exhibit 99.1 |
 Forward Looking Statements February 7, 2007 Certain statements in this presentation may contain forward-looking statements
within the meaning of the Private Securities Litigation Reform Act of 1995 and includes any use of the words “may,” “should,” “could,” “expects,” “plans,” “anticipates,” “believes,” “estimates,” “predicts,” “potential” or “continue”. These statements are based on management’s
current expectations and involve assumptions that may be subject to change or risks and uncertainties that could cause actual results to differ materially from those set forth in the statements.
Accordingly, actual outcomes and results may differ materially from what is
expressed or implied in any forward-looking statement contained in this presentation. The factors that may affect our performance may be found in the Annual Report on Form 10-K and other
periodic reports filed by CBOT Holdings, Inc. with the U.S. Securities and
Exchange Commission (“SEC”). These filings can be obtained at the SEC’s website at www.sec.gov. We undertake no obligation to
publicly update any forward-looking statements, whether as a result of
new information, future events or otherwise. Important Merger Information
In connection with the proposed merger of CBOT Holdings, Inc. (“CBOT”)
and the Chicago Mercantile Exchange Holdings Inc. (“CME”), the parties have filed relevant materials with the Securities Exchange Commission (“SEC”), including a joint proxy statement/prospectus regarding the proposed transaction. INVESTORS
ARE URGED TO READ THE JOINT PROXY STATEMENT/PROSPECTUS REGARDING THE
PROPOSED TRANSACTION, BECAUSE IT CONTAINS IMPORTANT INFORMATION. Investors are able to obtain a free copy of the joint proxy statement/prospectus, as well as other filings containing information about CBOT and CME without charge, at the
SEC’s website (http://www.sec.gov). Copies of the joint proxy
statement/prospectus can also be obtained when available, without charge by directing a request to CBOT Holdings, Inc., Attn: Investor Relations, at 141 West Jackson, Chicago, Illinois 60604
or calling (312) 435-3500. CBOT, CME and their respective directors and
executive officers and other members of management and employees may be deemed to be participants in the solicitation of proxies from CBOT shareholders in respect of the proposed transaction. Information regarding CBOT directors and executive officers is available in CBOT’s proxy statement for its 2006 annual meeting of stockholders, dated March 29, 2006. Additional information regarding
the interests of such potential participants is included in the joint proxy
statement/prospectus and the other relevant documents filed with the SEC. This document shall not constitute an offer to sell or the solicitation of an offer to buy any securities, nor shall there be any sale of securities in any jurisdiction in which such offer, solicitation or sale would be unlawful prior to
registration or qualification under the securities laws of any such
jurisdiction. No offering of securities shall be made except by means of a prospectus meeting the requirements of Section 10 of the Securities Act of 1933, as amended.
|
 CBOT:
2006 Record Year Trading volume - 20% Revenues - 35% Net income - 125% Market leader: Futures and options on futures #2 in United States #3 in World % chg |
 Overview Industry Trends Growth Strategies Financial Review Merger Update |
 Industry Trends Globalization Rapid international growth Technological advances Increased trading speed Industry consolidation Intensifying global competition among futures, cash and over-the-counter markets |
 Industry Growth Drivers Technological advances Globalization Emerging economies and urbanization Commodities as asset class Importance of risk management Asset class convergence U.S. government spending Deregulation |
 Large,
Expanding Market 1.6 2.1 2.6 3.4 4.0 4.6 6.1 2000 2001 2002 2003 2004 2005 2006 Source: Futures Industry Association Note: Excludes options on individual equities Global Futures & Options on Futures Contract Volume (billions of contracts) |
 Growing Operating Leverage: Record volume and earnings 20.4% 4.6% (5.0%) 28.3% 31.4% 20.3% 44.4% – 500 1,000 1,500 2,000 2,500 3,000 3,500 2000 2001 2002 2003 2004 2005 2006 (10.0%) 10.0% 30.0% 50.0% 70.0% Average Daily Volume (000's) Operating Margin (%) Item 2000-2006 CAGR Avg. Daily Volume 23% Revenues 19% Expenses 7% |
 CME
and CBOT Shareholder Benefits Well-Positioned in Dynamic Global Industry Stronger Base to Build Core Derivatives Business Accretive Transaction Platform for Product Innovation and Growth Substantial Benefits Transaction expected to create value for shareholders of both companies Synergy Opportunities Significant User Benefits |
 CBOT:
Growth Strategies Product enhancements Product innovation Global expansion Leveraging technology |
 Growth Strategies: Product Enhancements Enhancements to Metals Complex Listed options on Full-sized Gold and Silver futures contracts in open-auction markets, side-by-side electronic trading of the contracts in 4Q06 Electronic Warehouse Receipt system for Metals complex targeted for completion in 4Q06 Implemented directed fungibility program between Full- sized and mini-sized metals contracts in 3Q06 Expanded the hours of EFPs to a 24-hour schedule |
 Gold and Silver Futures Market Share (North American Market) Metals ADV increased nearly 10-fold in 2006 CBOT share of all North American listed Gold and Silver futures contracts traded
Mar-05 Jun-05 Sep-05 Dec-05 Mar-06 Jun-06 Sep-06 Dec.-06 0.0% 10.0% 20.0% 30.0% 40.0% 50.0% 60.0% CBOT gold share CBOT silver share |
 Growth Strategies: Product Enhancements Growth in Swap Futures Citigroup and Goldman Sachs began providing liquidity July 3, 2006 Third quarter 2006 trading volume up 44 percent Fourth quarter 2006 trading volume up 63 percent |
 Growth Strategies: Product Innovation Seven New Products in 2006 Full-Sized Gold Options Silver Options $25 Big Dow Futures Soybean Crush Options Binary Options Ethanol Dow Jones-AIG Excess Return Commodity Index |
 Growth Strategies: Product Innovation Address customer needs Respond to changing marketplace trends Leverage existing pools of liquidity Dow Jones SM U.S. Real Estate Index SM to launch Feb. ‘07 |
 Growth Strategies: Global Expansion Offering side-by-side trading of Ag futures Global access to e-cbot ® Ease of access to CBOT for market users Global Developing Markets Program |
 Electronic Agriculture Futures Side-by-Side trading of Agricultural Futures started 08/01/06 *Includes off exchange 01/01/06 thru 07/31/06 *Open Auction 96.5% Electronic 3.5% 08/01/06 thru 12/31/06 Electronic 33.0% *Open Auction 67.0% Pre and Post Side-by-Side Trading of Ag Futures Ag futures volume up 68% Aug. 1 to Dec. 31, 2006 |
 Successful Launch of Side-by-Side Trading of Ags Greater Global Access to Benchmark Agricultural Products – Single Pool of Liquidity Between Trading Venues On-floor plasma screens display e-cbot market data. Hand-held devices allow simultaneous trading on floor and e-cbot. 33% increase in firms trading Ag contracts |
 Growth Strategies: Global Expansion Global Developing Markets Program Fee Waivers for traders in nations that have not been market users Eight firms in four countries currently participating Educate potential participants about CBOT products |
 Growth Strategies: Global Expansion JADE – Benefits and Strengths Location: Singapore, the Asia-Pacific financial center that has a strong regulatory regime Geography: Asia is the major growth engine for production/consumption of commodities and commodity derivatives JV Partners: Both CBOT and SGX are market leaders in their individual fields Electronic Trading Platform: e-cbot, with its proven technology Clearing: SGX Derivatives Clearing First Cross Border Asian-Pacific Commodity Marketplace Specific appeal to Asia by trading ‘Asian’ Commodities |
 Growth Strategies: Leveraging Technology Technology upgrades on e-cbot ® |
 Financial Options Traded Electronically - % Electronic 14 24 28 29 34 54 85 71 79 0 25 50 75 100 4Q04 1Q05 2Q05 3Q05 4Q05 1Q06 2Q06 3Q06 4Q06 0 5 10 15 20 25% ADV (000s) e-cbot % |
 Growth Strategies: Leveraging Technology Technology upgrades on e-cbot ® Expanded distribution of e-cbot 13 points of presence internationally |
 CBOT:
Growth Strategies Product enhancements Product innovation Global expansion Leveraging technology |
 Financial Review Glen Johnson Senior Vice President and Chief Financial Officer |
 Growing Operating Leverage $62 $101 $90 $126 $190 $349 2001 2002 2003 2004 2005 2006 EBITDA ($mm) * Operating Income ($mm) $12 $62 $119 $77 $130 $276 2001 2002 2003 2004 2005 2006 * EBITDA is a Non-GAAP financial measure. Reconciliation of this to the most
comparable GAAP financial measure can be found at the end of this
presentation |
 Fourth Quarter 2006 Open- Auction 25% Electronic 73% Off- Exchange 2% CBOT Average Daily Volume by Trading Platform 4Q06 versus 4Q05 (millions of dollars, thousands of contracts) 4Q06 compared to 4Q05: Revenue up 48% Average daily volume up 36% Average rate per contract up 15% Exchange & clearing fee revenue up 56% Operating margin of 44.8% versus 24.4% $115 $169 24.4% 50.4% 2,404 3,269 $17.7 $54.4 Average Daily Volume Revenue Operating Margin Net Income 4Q05 4Q06 24.4% 44.8% $17.7 $44.9 GAAP Non-GAAP* Non-GAAP* GAAP *Excludes $9.5 million in merger-related expenses |
 Rate
per Contract $0 $25,000 $50,000 $75,000 $100,000 $125,000 $0.000 $0.100 $0.200 $0.300 $0.400 $0.500 $0.600 $0.700 Exchange Rev ($) 54,351 52,529 49,675 46,326 66,518 69,657 62,696 68,086 83,120 91,855 93,901 104,448 Clearing Rev ($) 16,589 19,634 18,609 18,724 21,277 22,559 20,027 18,274 23,231 25,366 29,265 30,061 RPC ($) 0.519 0.455 0.451 0.424 0.507 0.499 0.501 0.570 0.552 0.564 0.618 0.653 1Q04 2Q04 3Q04 4Q04 1Q05 2Q05 3Q05 4Q05 1Q06 2Q06 3Q06 4Q06 2Q06 to 3Q06: 10% increase 1Q06 to 2Q06: 2% increase Overall Rate per Contract (RPC) 3Q06 to 4Q06: 6% increase |
 Fourth Quarter Fixed and Volume-Based Expenses $14 $12 $9 $87 $93 $3 $0 $21 $16 4Q05 4Q06 Baseline D&A Special / Other Volume-based Merger-related Note: Special / Other expenses include loss impairment on long-lived assets,
litigation settlement and severance costs ($ in millions) |
 Fourth Quarter 2006 4Q06 versus 4Q05 (millions of dollars) 24.4% 50.4% $17.7 $54.4 Operating Margin Net Income 4Q05 4Q06 24.4% 44.8% $17.7 $44.9 GAAP Non-GAAP* Non-GAAP* GAAP *Excludes $9.5 million in merger-related expenses |
 Year
2006 Open-Auction 28% Electronic 70% Off-Exchange 2% CBOT Average Daily Volume by Trading Platform 2006 versus 2005 (millions of dollars, thousands of contracts) 2006 compared to 2005: Revenue up 35% Average daily volume up 20% Average rate per contract up 15% Exchange & clearing fee revenue up 38% Operating margin of 44.4% versus 28.3% $461 $621 28.3% 46.0% 2,677 3,211 $76.5 $181.9 Average Daily Volume Revenue Operating Margin Net Income 2005 2006 28.3% 44.4% $76.5 $172.2 GAAP Non-GAAP* Non-GAAP* GAAP *Excludes $9.7 million in merger-related expenses |
 Fixed
and Volume-Based Expenses Note: Special / Other expenses include loss
impairment on long-lived assets, litigation settlement and severance costs ($ in millions) $37 $33 $46 $55 $55 $10 $244 $261 $301 $331 $345 $1 $7 $4 $1 $21 $83 $71 $61 $14 $29 2002 2003 2004 2005 2006 Baseline D&A Special / Other Volume-based Merger-related |
 Year
2006 versus 2005 Net Income 2005 2006 Non-GAAP* GAAP *Excludes $9.7 million in merger-related expenses $76.5 $172.2 $76.5 $181.9 |
 Growing Operating Leverage New products Wider distribution of existing products Global expansion Leveraging technology efforts Fixed-cost control Strong cash flow with high capital efficiency Efficient and scalable operating platform |
 Merger Update Looking to the Future |
 CBOT/CME Proposed Merger Update Filed Form S-4 with SEC on Dec. 21, 2006 Filed “Amendment No.1” to S-4 with SEC on January 30, 2007 Entered into second review phase with the Department of Justice, as expected CBOT and CME shareholder and CBOT member votes expected in Q1 Integration planning underway Implemented planning structure and process Identified senior-level management team for CME Group Expect transaction to close in mid-2007 |
 CME
and CBOT Merger Transaction Highlights Solidifies combined company’s
status as the premier global exchange Expands presence in attractive derivatives markets Positions combined company for continued growth Creates operational and cost efficiencies for customers $125+ million in estimated annual cost savings expected to be achieved year two post closing Expected to be accretive to earnings 12 – 18 months post close Potential revenue opportunities Enhances operating leverage Strategically Attractive Financially Compelling |
 CBOT:
Looking to the Future Increase access to our markets Deepen pools of liquidity Ensure market integrity |
 |
 Supplementary Information |
 Supplementary Information 2000 2001 2002 2003 2004 2005 2006 Non-GAAP Financial Measure - EBITDA $37 $62 $101 $90 $126 $190 $349 Deduct: Interest Expense (7) (7) (5) (4) (5) (3) (2) Income Tax Expense (1) (5) (24) (22) (33) (55) (120) Depreciation and Amortization Expense (41) (44) (38) (33) (46) (55) (55) Comparable GAAP Measure - Net Income ($12) $6 $34 $31 $42 $77 $172 Reconciliation of Non-GAAP Measure Earnings before Interest, Tax, and Depreciation
and Amortization Expense (EBITDA) to Net Income ($ in millions)
|
 Supplementary Information Reconciliation of GAAP to Non-GAAP Financial Measures CBOT used non-GAAP financial measures of operating performance to eliminate 2006
merger-related expenses attributable to the announced merger with CBOT
and CME. Non-GAAP measures do not replace and are not superior to the presentation of our GAAP financial results but are provided to improve overall understanding of our current financial performance and our
prospects for the future. GAAP Operating Income Merger-related Expenses Non-GAAP Operating Income FY 2006 $276.0 $9.7 $285.7 Q4 2006 $ 75.8 $9.5 $ 85.3 GAAP Operating Margin Merger-related Expenses Non-GAAP Operating Margin FY 2006 44.4% 1.6% 46.0% Q4 2006 44.8% 5.6% 50.4% GAAP Net Income Merger-related Expenses Non-GAAP Net Income FY 2006 $172.2 $9.7 $181.9 Q4 2006 $ 44.9 $9.5 $ 54.4 GAAP Earnings Per Share Merger-related Expenses Non-GAAP Earnings Per share FY 2006 $3.26 $0.18 $3.44 Q4 2006 $0.85 $0.18 $1.03 |
 Agriculture Complex Growth Rate 373 404 350 331 412 529 490 611 0 100 200 300 400 500 600 700 1Q05 2Q05 3Q05 4Q05 1Q06 2Q06 3Q06 4Q06 -20 0 20 40 60 80 100 120 140% ADV (000s) Growth vs. Pr Yr |
 Growth in ADV by Product Group 20% 2,677 3,211 Total 880% 5 49 Metals, Energy and Other
7% 109 117 Equity Index 40% 365 511 Agricultural 15% 2,199 2,534 Interest Rate % change 2005 2006 ADV (000) |
 Historical Volume 672 771 1,064 1,452 1,937 2,199 2,534 511 109 117 239 241 365 337 290 265 15 21 36 62 95 49 1 3 5 927 1,037 1,365 1,804 2,372 2,677 3,211 2000 2001 2002 2003 2004 2005 2006 Metals, energy, and other Equity index Agricultural Interest rate Average Daily Volume (in thousands) *May not add due to rounding |
 CBOT’s Volume Growth Average Daily Volume by Venue (in thousands) 62 209 513 935 1,382 1,739 2,240 865 828 797 792 885 834 885 54 76 105 105 85 3,211 2,677 2,372 1,804 1,365 1,037 927 2000 2001 2002 2003 2004 2005 2006 Off-exchange Open-auction Electronic *May not add due to rounding |
 Services $16
3% Interest Income & Other $2 0% Building $23 4% Market Data $99 16% Exchange Fees & Clearing $481 77% Sources of Revenue for 2006 Total Exchange & Clearing Fees = $481 mm Metals $13 3% 30 yr $59 12% 5 yr $69 14% 10 yr $170 35% Agriculture $100 21% 2 yr $21 4% 30 day + other $27 6% Equities $22 5% Year 2006 Revenue Components ($ in millions) Year 2006 Exchange & Clearing Fees ($ in millions) Total Revenues = $621 mm |