CME Group Inc. is acquiring the Kansas City Board of Trade in a $126 million cash deal that will expand its agriculture futures business to include the type of wheat found in bread and other food products.
The acquisition will allow CME to compete directly with the Intercontinental Exchange Inc. in the market for hard red winter wheat, a variety that represents much of the wheat grown in the U.S.
Under terms of the agreement, KCBT will make a distribution of excess cash to members concurrent with closing. CME will maintain a committee of KCBT market participants to advise on hard red winter wheat contract terms and conditions for at least three years. It also will keep the KCBT trading floor open in Kansas City for at least six months.
The deal is expected to close later this year pending approval of KCBT shareholders, regulators and other closing conditions. The KCBT board of directors has approved the transaction.
KCBT Chairman Steven K. Campbell said in a statement that they considered a number of qualified interested parties before agreeing to sell to CME Group. The other suitors were not identified.
The 156-year-old KCBT was founded by merchants who wanted to find a better way to buy and sell grain. Campbell said that it makes sense for the exchange to partner with CME because of its technology and resources.
CME already offers contracts on other varieties of wheat, including spring red winter wheat which primarily is used to feed livestock. CME CEO Phupinder Gill said the addition of hard red winter wheat will enable producers and commercial participants to buy and sell both key benchmark contracts in one place.
The acquisition of KCBT is the latest in a series of purchases made by Chicago-based CME, which already owns the Chicago Board of Trade and the New York Mercantile Exchange. It offers contracts on a wide range of products, including metals and energy products.
Shares of CME fell 9 cents to $57.40 in afternoon trading. The price has ranged from $44.94 to $60.92 per share during the past 52 weeks.