Taxes may undercut CME-Nymex deal

Aug. 13, 2008 at 1:11 PM
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CHICAGO, Aug. 13 (UPI) -- Income tax may trip up a deal for the CME Group to purchase the New York Mercantile Exchange, sources said Wednesday.

Shareholders from both parties face an Aug. 18 deadline to vote on the $8.3 billion deal, but CME said in a Securities and Exchange Commission filing last week that a revised bid for Nymex appears to be a wash for Nymex members, because the IRS would see the new bid differently, the Chicago Tribune reported.

A previous bid of $612,000 paid to each Nymex seat holder would have been seen as long-term capital gains, taxed at 15 percent, because members would have sold their seats, the Tribune reported.

A new offer, which CME said was "full and final," was for $750,000 and would likely be taxed as "ordinary income" as it allows Nymex members to retain their seats, the recent filing said

That potentially jumps the tax rate to 32 percent, the Tribune reported.

Since the terms of the deal were changed July 18, CME Group has raised $3.2 billion to finance the deal. The deal, however, must be approved by 75 percent of the 816 Nymex members, the newspaper said.

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