Pressure Builds on Brazil Exchange Merger

The likelihood of merger talks between the Bovespa and the BM&F increased as US exchanges CME and NYMEX said Monday they are discussing a deal of their own. The announcement sets the stage for a race between the CME and the Bovespa to acquire the BM&F, according to an Itau report. The CME said last week it was acquiring a 10% stake in the BM&F through a share swap. It may eventually try to buy all of the BM&F should General Atlantic, a significant shareholder in both exchanges, choose to support a bid by the CME, say the shop’s analysts. Meanwhile the Bovespa’s CEO, Gilberto Mifano, recently told LatinFinance that a linkup with the BM&F would make sense and that the two exchanges would at some point discuss a deal. Itau speculates the threat of a bid by the CME will spur Bovespa shareholders to seek approval for a BM&F bid. “We continue to believe that this merger involving the Brazilian exchanges may occur before April 22 (the end of the lockup for BOVH3)…” says Itau. On that date, Bovespa shareholders will be free to sell an additional 24% of the exchange’s shares, which could also be used to purchase BM&F stock. Yesterday BM&F shares were down 14.5% from their November IPO price. A BM&F executive told LatinFinance he would not comment on the CME-NYMEX news and maintained that as before, there are no current discussions with the Bovespa for a deal. An executive at Goldman Sachs, the shop that advised the Bovespa on its IPO and is currently involved in the US merger, also declined to comment, as did a partner at General Atlantic.