The New York Mercantile Exchange has retained Salomon Smith Barney (SSB) to spearhead its evaluation of the benefits of demutualization. At the same time, the exchange is drawing closer to finalizing its merger with the International Petroleum Exchange.
A source familiar with the NYMEX says that SSB has been hired to perform a study of the pros and cons of the exchange's proposed migration to a for-profit ownership model. Currently, the NYMEX is leaning towards issuing a private placement that would enable it clearing members to purchase equity in the exchange (ETW, 9/6/99). And SSB will help the exchange decide whether that would be a wise move.
Prior to selecting SSB as its for-profit advisor, the source says, the NYMEX also considered retaining CS First Boston and Donaldson Lufkin and Jenrette. But the source says the exchange decided to stick with SSB because SSB is also putting together demutualization studies for the Chicago Mercantile Exchange and the Nasdaq Stock Market.
Meanwhile, in terms of the pending merger between the NYMEX and IPE, the source says that appears NYMEX will acquire roughly 40% of the London-based energy market. The source declines to specify a timeframe for the completion of the merger, but asserts that it is likely that the markets already have "a handshake agreement" on the deal. Moreover, the source says that due to regulatory reasons, the exchanges have decided that IPE will continue to operate as a "completely independent" energy market after the merger.
Prior to making a pitch to acquire 40% of IPE, the source adds, the NYMEX most recently put a bid in to purchase between "50% and 65%" of the exchange. However, after some IPE members expressed concern over NYMEX acquiring such a large chunk of their market, the exchange scaled back on it proposal and made a bid to purchase only "a controlling interest" in the IPE, the source says.