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Could it Really Be Happening? CBOE IPO Moves Ahead

Could it Really Be Happening?  CBOE IPO Moves Ahead

The initial public offering for the CBOE is coming closer.  CBOE Holdings, Inc. had an amended filing on May 18 (the SEC filing can be found here).  While some of the terms are still outstanding, details have emerged on how much is being sold by exchange members (selling holders) and how much will go into the company coffers.  The size of this underwriting offering is far larger than any deal seen in recent IPOs.  The exchange will trade on NASDAQ under the ticker “CBOE,” and trading is expected to begin on June 15.


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Seatholders Strongly in Favor
According to the Wall Street Journal, on Friday seatholders voted 870 memberships in favor of a management-backed proposal to take CBOE Holdings public in a deal valuing the exchange operator at around $2.53 billion.  Thirty-four votes were cast against the plan, according to the company.

The article goes on to say that members' approval now gives CBOE management about a week to prepare before heading out on a road show—slated to begin June 1—for the IPO.

Stock Details
CBOE Holdings Inc. said its initial public offering will total 11.7 million shares, which may value the Chicago Board Options Exchange at about $3 billion.  The Chicago-based company will have 102.6 million shares following the deal, according to the SEC filing.  CBOE is converting 930 seats, or memberships, into shares as part of a demutualization process. The last seat sold for $2.35 million on May 20, according to the company’s website.

The common stock to be outstanding immediately after this offering will be the following:

• 13,940,552 shares of unrestricted common stock
• 44,323,803 shares of Class A-1 common stock
• 44,323,803 shares of Class A-2 common stock
• 102,588,158 shares of all classes of common stock

Timing
According to Reuters, the planned CBOE offering comes as the U.S. market for IPOs is struggling. The Greek debt crisis and the May 6 unexplained plunge in U.S. stock prices have caused a number of deals to be canceled, postponed or repriced. Some analysts have said there could be a broader dampening effect on new issues.

"Everybody knows that exchange offerings have been very hot," said Josef Schuster, founder of Chicago-based IPO research house IPOX Schuster LLC in Chicago. "They are very rare and there is a lot of demand. The offering is expected to have a high initial return."

Comparisons
Bloomberg reported that NYSE Euronext and Nasdaq OMX Group Inc., the largest owners of U.S. equity exchanges, are valued at $7.51 billion and $3.97 billion, respectively. CME Group Inc., which owns the world’s largest futures exchange, is worth $20.4 billion.

At a value of $3 billion, CBOE’s price-to-earnings ratio is about 28.7 times profit from the past 12 months. That’s closest to CME, whose multiple is 22.7. NYSE and Nasdaq trade for 12.4 and 10.7 times trailing earnings, respectively.

Underwriting Group

• Goldman Sachs is the sole global coordinator of the IPO.
• The joint book-running managers are Goldman Sachs, Merrill Lynch, Barclays Capital, Citadel Securities, Citigroup Global Markets, JPMorgan Securities, and UBS.
• Co-Managers are BMO Capital Markets, Credit Suisse Securities, Morgan Stanley, Oppenheimer & Co., Raymond James & Associates, Cabrera Capital Markets, Keefe Bruyette & Woods, Loop Capital Markets, Macquarie Capital (USA), Rosenblatt Securities, and Sander O’Neill & Partners.