CME Group 3Q profit nearly doubles on added revenue from acquisition of Chicago Board of Trade

October 24, 2007

Financial exchange operator CME Group Inc. said Wednesday its third-quarter earnings rose 94 percent due to its $11.9 billion acquisition of the Chicago Board of Trade.

CME, which also owns the Chicago Mercantile Exchange, reaped the benefits from market turmoil which has resulted in heavy speculating and hedging among investors. Clearing and transaction fee revenues from the two exchanges, assuming they had been combined a year ago, jumped 46 percent to $496 million.

Profits easily topped Wall Street’s expectations and total revenue more than doubled.

”Almost any way we look at it, CME seems to have exceeded our estimates,” said Goldman Sachs analyst Daniel Harris in a note to investors.

Net income rose to $201.6 million, or $3.87 per share, from $103.8 million, or $2.95 per share, during the same quarter a year ago.

CME Group closed on its acquisition of the Board of Trade on July 12, so net income figures only include operating results from CBOT after that date. Net income also includes $20 million in merger-related expenses and $28.5 million of non-operating expenses.

Operating income, which includes the full quarter of CBOT income and excludes the one-time charges, was $235.8 million, or $4.31 per share — well above the $4.10 forecast by analysts polled by Thomson Financial.

Revenue for the quarter reached $565.2 million, up from $274.7 million during the same quarter a year ago.

”We saw robust growth in our agricultural, equity index, foreign exchange and interest rate products, as well as in our energy and metals derivatives processing business,” CME Group Executive Chairman Terry Duffy said in a statement.

Combining the Merc and Board of Trade creates the world’s largest futures and options market for everything from interest rates to pork bellies, and makes it the world’s No. 1 exchange of any kind by market value.

The deal left CME with enough resources to expand globally, and late Tuesday the company said it has agreed to buy about 10 percent of Brazil’s BM&F derivatives exchange in return for a 2 percent stake in CME worth about $700 million. The share swap is one of the first large transactions between a U.S. exchange and a South American financial-markets operator.

For the first nine months, net income was $457 million, or $11.18 per share, up from $305 million, or $8.68 per share. Revenues climbed to $1.23 billion from $808 million.

CME shares jumped $25.55, or 4 percent, to $660.15 in midday trading.

AP