SEC Comment Letter for CME GROUP INC. (CME) (CIK 0001156375) (CME) — Feb 15, 2007
CME GROUP INC. (CME) (CIK 0001156375)
Date: Feb. 15, 2007 · CIK: 0001156375 · Accession: 0000000000-07-008251
AI Filing Summary & Sentiment
Reasoning
File numbers found in text: 333-139538
Referenced dates: January 23, 2007
Letter
UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549-7010 DIVISION OF CORPORATION FINANCE Mail Stop 7010 By U.S. Mail and facsimile to (312) 407-8522 Kathleen M. Cronin Managing Director, General Couns el and Corporate Secretary Chicago Mercantile Exchange Holdings Inc. 20 South Wacker Drive Chicago, Illinois 60606
Re: Chicago Mercantile Exchange Holdings Inc. Amendment No. 1 to Registrati on Statement on Form S-4 Filed January 30, 2007 File No. 333-139538
Dear Ms. Cronin:
We have reviewed your filings and have the following comments. We welcome any questions you may have about our comments or any other aspect of our review. Feel free to call us at the telephone numbers listed at the end of this letter.
General
1. We note the recommendation of CBOT’s board of directors with respect to the proposal to vote upon an adjournment or postponement to solicit additional proxies. Please confirm that neither the board of directors of CME nor CBOT Holdings has issued a recommendation with respect to the proposals to vote upon an adjournment or postponement of the meetings of the CME stockholders or CBOT Holdings Class A Stockholders or, ot herwise, revise the letters to the companies’ respective stockholders to di sclose the respective recommendations.
Summary, page 1 Questions and Answers About the Merger, page 1 What will CBOT Holdings Class A stockholde rs receive in the merger?, page 1
2. We note your responses to comments 5 a nd 6 of our letter dated January 23, 2007, as well as the calculation of the total preliminary purch ase price on page 140. To provide investors with a mo re thorough understanding of the value of the merger
Kathleen M. Cronin Chicago Mercantile Exch ange Holdings Inc. February 15, 2007 Page 2 consideration, please revise your disclosure here and on page 140 to disclose such consideration as of the most recent pr acticable date since there have been significant fluctuations in CME’s stock price.
Other Information Regarding the Merger, page 9 CBOT Holdings Financial Advisor . . ., page 10
3. We note your response to comment 8 of our letter dated January 23, 2007. Please revise to disclose the percentage of th e total consideration that will be paid by CBOT Holdings to JPMorgan if the merger is consummated.
Opinion of Lehman Brothers, Financia l Advisor to CME Holdings, page 69 Comparable Company Analysis, page 71
4. We note your response to comment 19 of our letter dated January 23, 2007. It is unclear to us whether the qualitative j udgments made by Lehm an Brothers were to disregard the quantitati ve results for the compan ies listed on page 71, other than those identified as most closel y matching the financ ial and operating characteristics of CBOT Holdings or, alternatively, whether such judgments resulted in adjustments to a larger quantita tive analysis. If th e reference range for the implied share price of CBOT Holdings was calculated solely by reference to the three companies identified in your response, so state.
CBOT Discounted Cash Flow Analysis, page 73
5. We note your response to comment 20 of our letter dated January 23, 2007. Please expand your discussion to disclose the companies selected by Lehman Brothers for its determination of the fu ture market volatility component of its weighted average cost of capital calcul ation. In addition, please revise the statement that “discount rates utilized in this analysis were chosen by Lehman Brothers based on its expertise and experien ce . . . and also on an analysis of the weighted average cost of capital of CBOT Holdings” to clarify whether the Lehman Brothers utilized its “expertis e and experience” in calculating the weighted average cost of capital, which was used as the discount rate, or whether such “expertise and experience” was used in adjusting the calculation of the weighted average cost of cap ital to reach the range of discount rates used in the analysis.
Opinion of JP Morgan, Financial Advisor to CBOT Holdings, page 83
6. We note your response to comment 23 of our January 23 letter. Please revise to make the disclosures requested in that comment in your discussion of the opinions of JPMorgan and Lazard.
Kathleen M. Cronin Chicago Mercantile Exch ange Holdings Inc. February 15, 2007 Page 3 Publicly Traded Comparable Company Analysis, page 86
7. We note your revision on page 86 in re sponse to comment 18 of our January 23 letter. Please revise to disclose the crit eria that JPMorgan used in determining which companies were “relevant.”
Discounted Cash Flow Analysis, page 87
8. We note your revised disclosure regarding the range of discount rates selected. Please expand your disclosure to discuss th e analyses of selected publicly traded companies engaged in relevant businesse s that were performed, as well as the companies deemed relevant, in calcul ating the applicab le discount rate.
The Merger Agreement, page 109 Representations and Warranties, page 117
9. We note your response to comment 28 of our letter dated January 23, 2007. Please provide us with a list briefly identifying the contents of all omitted schedules.
Conditions to Complete the Merger, page 120
10. We note your response to comment 29 of our January 23 letter. Please revise your discussion to briefly describe the facts under which the parties may waive an existing condition to the merger.
Exhibits Exhibit 5.1, Form of Opinion of Kathleen M. Cronin . . . regarding legality of the securities being issued
11. Please confirm that the reference in th e fifth paragraph of the opinion to the corporate laws of the State of Delaware includes all statutes , including the rules and regulations underlying those provisions , applicable judicial and regulatory determinations, and applicable provisions of the Delaware Constitution.
Exhibit 8.1, Form of Opinion of Skadde n Arps . . . relating to tax matters
12. We note the opinion is that the merger will qualify as a reorganization within the meaning of Section 368(a) of the Internal Revenue Code. Please submit a revised opinion clarifying that the consequence of such a qualification is that the merger is tax free. Submit a similarly revi sed opinion with respect to the tax consequences of the merger to CBOT Holdings, Inc.
Kathleen M. Cronin Chicago Mercantile Exch ange Holdings Inc. February 15, 2007 Page 4
13. The assumptions that the merger wi ll qualify as a statutory merger under Delaware law and that the merger agreement will be enforceable should be deleted, as the tax opinion cannot assume any legal conclusion underlying the opinion.
14. The statement of reliance upon the statemen ts and representations of the officers and other representatives of the parties should be revised to indicate that such reliance is limited to factual matters or , alternatively, the statement should be deleted.
15. The revised tax opinion should delete the statement that the opinion “is expressed as of the date hereof,” as such opinion mu st speak as of the date of effectiveness of the registration statement.
16. We note the statement in the second to la st paragraph that the “letter has been prepared for you solely in connection with th e Merger.” It is unclear to us whom counsel is referring to in its use of “you.” Note that use of the tax opinion may not be limited to the board of directors or to the registrant.
17. Please also include the signature of counsel in your revised tax opinion.
Exhibit 8.2, Form of Opinion of Mayer, Brown, Rowe & Maw LLP relating to tax matters
18. Please submit a revised opinion of counsel that does not contain an assumption regarding the enforceability of the merger agreement.
Closing Comment
19. Please also review the representations requested on page 7 of our letter dated January 23, 2007, and provide these repres entations in the form requested.
Kathleen M. Cronin Chicago Mercantile Exch ange Holdings Inc. February 15, 2007 Page 5 You may contact Bret Johns on, Staff Accountant, at (202) 551-3753 or Jennifer Thompson, Senior Staff Accountant, at (202) 551-3737 if you have questions regarding comments on the financial statements and related matters. Please contact Matt Franker, Staff Attorney, at (202) 551-3749 or me, at (202) 551-3767 with any other questions.
Sincerely,
Jennifer R. Hardy
Branch Chief
Show Raw Text
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549-7010
DIVISION OF
CORPORATION FINANCE
February 15, 2007
Mail Stop 7010
By U.S. Mail and facsimile to (312) 407-8522
Kathleen M. Cronin
Managing Director, General Couns el and Corporate Secretary
Chicago Mercantile Exchange Holdings Inc.
20 South Wacker Drive
Chicago, Illinois 60606
Re: Chicago Mercantile Exchange Holdings Inc.
Amendment No. 1 to Registrati on Statement on Form S-4
Filed January 30, 2007
File No. 333-139538
Dear Ms. Cronin:
We have reviewed your filings and have the following comments. We welcome
any questions you may have about our comments or any other aspect of our review. Feel
free to call us at the telephone numbers listed at the end of this letter.
General
1. We note the recommendation of CBOT’s board of directors with respect to the
proposal to vote upon an adjournment or postponement to solicit additional
proxies. Please confirm that neither the board of directors of CME nor CBOT
Holdings has issued a recommendation with respect to the proposals to vote upon
an adjournment or postponement of the meetings of the CME stockholders or CBOT Holdings Class A Stockholders or, ot herwise, revise the letters to the
companies’ respective stockholders to di sclose the respective recommendations.
Summary, page 1
Questions and Answers About the Merger, page 1
What will CBOT Holdings Class A stockholde rs receive in the merger?, page 1
2. We note your responses to comments 5 a nd 6 of our letter dated January 23, 2007,
as well as the calculation of the total preliminary purch ase price on page 140. To
provide investors with a mo re thorough understanding of the value of the merger
Kathleen M. Cronin
Chicago Mercantile Exch ange Holdings Inc.
February 15, 2007 Page 2
consideration, please revise your disclosure here and on page 140 to disclose such consideration as of the most recent pr acticable date since there have been
significant fluctuations in CME’s stock price.
Other Information Regarding the Merger, page 9
CBOT Holdings Financial Advisor . . ., page 10
3. We note your response to comment 8 of our letter dated January 23, 2007. Please
revise to disclose the percentage of th e total consideration that will be paid by
CBOT Holdings to JPMorgan if the merger is consummated.
Opinion of Lehman Brothers, Financia l Advisor to CME Holdings, page 69
Comparable Company Analysis, page 71
4. We note your response to comment 19 of our letter dated January 23, 2007. It is
unclear to us whether the qualitative j udgments made by Lehm an Brothers were
to disregard the quantitati ve results for the compan ies listed on page 71, other
than those identified as most closel y matching the financ ial and operating
characteristics of CBOT Holdings or, alternatively, whether such judgments resulted in adjustments to a larger quantita tive analysis. If th e reference range for
the implied share price of CBOT Holdings was calculated solely by reference to
the three companies identified in your response, so state.
CBOT Discounted Cash Flow Analysis, page 73
5. We note your response to comment 20 of our letter dated January 23, 2007. Please expand your discussion to disclose the companies selected by Lehman
Brothers for its determination of the fu ture market volatility component of its
weighted average cost of capital calcul ation. In addition, please revise the
statement that “discount rates utilized in this analysis were chosen by Lehman
Brothers based on its expertise and experien ce . . . and also on an analysis of the
weighted average cost of capital of CBOT Holdings” to clarify whether the
Lehman Brothers utilized its “expertis e and experience” in calculating the
weighted average cost of capital, which was used as the discount rate, or whether such “expertise and experience” was used in adjusting the calculation of the
weighted average cost of cap ital to reach the range of discount rates used in the
analysis.
Opinion of JP Morgan, Financial Advisor to CBOT Holdings, page 83
6. We note your response to comment 23 of our January 23 letter. Please revise to
make the disclosures requested in that comment in your discussion of the opinions of JPMorgan and Lazard.
Kathleen M. Cronin
Chicago Mercantile Exch ange Holdings Inc.
February 15, 2007 Page 3
Publicly Traded Comparable Company Analysis, page 86
7. We note your revision on page 86 in re sponse to comment 18 of our January 23
letter. Please revise to disclose the crit eria that JPMorgan used in determining
which companies were “relevant.”
Discounted Cash Flow Analysis, page 87
8. We note your revised disclosure regarding the range of discount rates selected.
Please expand your disclosure to discuss th e analyses of selected publicly traded
companies engaged in relevant businesse s that were performed, as well as the
companies deemed relevant, in calcul ating the applicab le discount rate.
The Merger Agreement, page 109
Representations and Warranties, page 117
9. We note your response to comment 28 of our letter dated January 23, 2007. Please provide us with a list briefly identifying the contents of all omitted schedules.
Conditions to Complete the Merger, page 120
10. We note your response to comment 29 of our January 23 letter. Please revise
your discussion to briefly describe the facts under which the parties may waive an existing condition to the merger.
Exhibits
Exhibit 5.1, Form of Opinion of Kathleen M. Cronin . . . regarding legality of the
securities being issued
11. Please confirm that the reference in th e fifth paragraph of the opinion to the
corporate laws of the State of Delaware includes all statutes , including the rules
and regulations underlying those provisions , applicable judicial and regulatory
determinations, and applicable provisions of the Delaware Constitution.
Exhibit 8.1, Form of Opinion of Skadde n Arps . . . relating to tax matters
12. We note the opinion is that the merger will qualify as a reorganization within the meaning of Section 368(a) of the Internal Revenue Code. Please submit a revised
opinion clarifying that the consequence of such a qualification is that the merger
is tax free. Submit a similarly revi sed opinion with respect to the tax
consequences of the merger to CBOT Holdings, Inc.
Kathleen M. Cronin
Chicago Mercantile Exch ange Holdings Inc.
February 15, 2007 Page 4
13. The assumptions that the merger wi ll qualify as a statutory merger under
Delaware law and that the merger agreement will be enforceable should be deleted, as the tax opinion cannot assume any legal conclusion underlying the opinion.
14. The statement of reliance upon the statemen ts and representations of the officers
and other representatives of the parties should be revised to indicate that such
reliance is limited to factual matters or , alternatively, the statement should be
deleted.
15. The revised tax opinion should delete the statement that the opinion “is expressed
as of the date hereof,” as such opinion mu st speak as of the date of effectiveness
of the registration statement.
16. We note the statement in the second to la st paragraph that the “letter has been
prepared for you solely in connection with th e Merger.” It is unclear to us whom
counsel is referring to in its use of “you.” Note that use of the tax opinion may
not be limited to the board of directors or to the registrant.
17. Please also include the signature of counsel in your revised tax opinion.
Exhibit 8.2, Form of Opinion of Mayer, Brown, Rowe & Maw LLP relating to tax
matters
18. Please submit a revised opinion of counsel that does not contain an assumption
regarding the enforceability of the merger agreement.
Closing Comment
19. Please also review the representations requested on page 7 of our letter dated
January 23, 2007, and provide these repres entations in the form requested.
Kathleen M. Cronin
Chicago Mercantile Exch ange Holdings Inc.
February 15, 2007 Page 5
You may contact Bret Johns on, Staff Accountant, at (202) 551-3753 or Jennifer
Thompson, Senior Staff Accountant, at (202) 551-3737 if you have questions regarding
comments on the financial statements and related matters. Please contact Matt Franker, Staff Attorney, at (202) 551-3749 or me, at (202) 551-3767 with any other questions.
Sincerely,
Jennifer R. Hardy
Branch Chief
cc: Rodd M. Schreiber
Susan S. Hassan
Skadden, Arps, Slate, Meagher & Flom LLP
333 West Wacker Drive
Chicago, Illinois 60606