By the OGJ Online Staff
HOUSTON, May 31 -- IntercontinentalExchange Inc., the Atlanta-based internet commodity trading company, extended to June 15 its offer to acquire the UK's International Petroleum Exchange PLC.
About 60% of IPE's shares were tendered as of the original May 29 closing date, ICE reported Wednesday. In an interview earlier this month, ICE chief executive Jeff Sprecher predicted the deal could be completed by June 1. Thursday the UK secretary of state for trade and industry cleared the way for the deal by not referring it to the UK Competition Commission.
If completed, the $131 million acquisition will create one of the world's largest energy and commodities exchanges with a foot in both an open outcry exchange and the growing electronic trading business.
ICE was founded in March 2000 and offers over-the-counter trading in 110 products in physical as well as cash-settled derivatives based on oil, natural gas, electricity, and metals. IPE's Brent crude oil contract and gas oil futures contract are widely used in Europe and elsewhere as price benchmarks. The exchange recently added electricity futures contracts and also makes a market in gas.
Sprecher told OGJ Online one of the advantages of the combination is that it will "permit everything to be traded on one screen." He said a merger will resolve credit and settlement issues and other "structural issues of trading OTC products."
While Enron Corp. dominated on line trade in 2000, new industry consortia like TradeSpark and IntercontinentalExchange are ramping up volume and increasing liquidity for the entire market, according Forrester Research Inc., Cambridge, Mass. By 2005, Forrester is predicting the majority of on line trading will occur at just a few sites.
The speed and efficiency of on line trade will also push traders to develop straight-through processing from order capture to contract settlement, said Forrester senior analyst Jim Walker, allowing companies to post real-time profit and loss in a highly volatile market.
Liquidity tends to flow to a limited number of exchanges, and analysts say transaction costs will continue to be a driving force as the business consolidates. ICE estimates OTC metals and energy trading generated $350 million in commissions industry wide in 2000, representing a substantial growth opportunity for the combined company.
