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8-K - FORM 8-K - CME GROUP INC. | d253773d8k.htm |
EX-99.1 - PRESS RELEASE - CME GROUP INC. | d253773dex991.htm |
Exhibit 99.2
The McGraw-Hill Companies
CME GROUP
Strategic Joint Venture Between McGraw-Hill and CME Group
Investor Presentation
November 4, 2011
Donald S. Rubin
Senior Vice President, Investor Relations The McGraw-Hill Companies
John Peschier
Managing Director, Investor Relations CME Group
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Forward-Looking Statements
Statements in this presentation that are not historical facts are forward-looking statements. These statements are not guarantees of future performance and involve risks, uncertainties and assumptions that are difficult to predict. Therefore, actual outcomes and results may differ materially from what is expressed or implied in any forward-looking statements. These statements include, but are not limited to, the benefits of the transaction involving The McGraw-Hill Companies and CME Group, including future financial and operating results, the joint ventures plans, objectives, expectations and intentions and other statements that are not historical facts. Such statements are based on current beliefs, expectations, forecasts, and assumptions of The McGraw-Hill Companies and CME Groups management which are subject to risks and uncertainties which could cause actual outcomes and results to differ materially from these statements. Other risks and uncertainties relating to the proposed transaction include, but are not limited to the satisfaction of conditions to closing, including receipt of antitrust, regulatory and other approvals; the proposed transaction may not be consummated on the proposed terms and schedule; uncertainty of the expected financial performance of the joint venture following completion of the proposed transaction; The McGraw-Hill Companies and CME Group may not be able to achieve the expected cost savings, synergies and other strategic benefits as a result of the proposed transaction or may take longer to achieve the cost savings, synergies and benefits than expected; general industry and market conditions; general domestic and internal economic conditions; the strength of the equity and debts markets; and governmental laws and regulations affecting domestic and foreign operations. The McGraw-Hill Companies and CME Group undertake no obligation to publicly update any forward-looking statements, whether as a result of new information, future events or otherwise.
For more information regarding other related risks, see Item 1A of McGraw-Hills Annual Report on Form 10-K for the fiscal year ended December 31, 2010 and Item 1A of CME Groups Annual Report on Form 10-K for the fiscal year ended December 31, 2010 and any updates provided in their most recent Quarterly Reports on Form 10-Q. Copies of said 10-Ks and 10-Qs are available online at http://www.sec.gov or on request from the applicable company. You should not place undue reliance on forward-looking statements, which speak only as of the date of this presentation. Except for any obligation to disclose material information under the Federal securities laws, The McGraw-Hill Companies and CME Group undertake no obligation to release publicly any revisions to any forward-looking statements to reflect events or circumstances after the date of this presentation.
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Harold McGraw III
Chairman, President and CEO The McGraw-Hill Companies
Craig Donohue
CEO CME Group
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New Strategic Partnership Creates Significant Value
The McGraw-Hill Companies
S&P INDICES
CME Group
Dow Jones Indexes
A CME Group Company
DOWJONES
McGrawHill Markets* is a leading content and
CME Group is the worlds leading and most diverse analytics provider to financial and commodities markets derivatives marketplace
S&P Indices is a global leader in index creation and
The marquee Dow Jones Industrial Average and other innovation calculating over 700,000 indices covering all Dow Jones Indexes brands are well known globally major markets
Strong retail recognition
Strong institutional relationships
Dow Jones Indexes (owned 90% by CME Group, 10% by
The S&P indices are among the most recognized and
Dow Jones) is a leading global provider of index heavily traded indices in the world including: the S&P products, including 130,000 indices 500, the S&P/CaseShillerr Index and the S&P GSCI
Creates Significant Value for All Stakeholders
Creates a leading index provider well-positioned to serve global institutional and retail customers
Delivers significant value to parent companies and customers
Leverages parent companies unique and complementary strengths
Establishes an enhanced platform for growth and innovation opportunities
Presents an attractive financial profile with improved efficiency and strong free cash flow
* Working name for the McGraw-Hill Companies following the tax-free spin-off of McGraw-Hill Education 4
Key Transaction Terms
Overview and Structure
Joint Venture between McGraw-Hill, CME Group, and Dow Jones
McGraw-Hill will contribute its S&P Indices business
The CME Group / Dow Jones joint venture will contribute Dow Jones Indexes
Joint Venture transaction is tax-free
McGraw-Hill will acquire Credit Market Analysis (CMA) from CME Group
Ownership
McGraw-Hill: 73.0%
CME Group 24.4% / Dow Jones 2.6%
Commercial Terms
S&P Indices will enjoy revenue diversification stemming from a change in fee structure (from a fee per trade to a share of CME Group equity complex profits) and receive improved license terms
CME Group will have a long term, ownership-linked, exclusive license to list futures and options on futures based on S&P Indices
Governance / Organization
The JV will be consolidated into McGraw-Hills financials
Alexander Matturri, Executive Managing Director of S&P Indices, will be named CEO
7-member board with 5 directors to be designated by McGraw-Hill, 2 by CME Group
Timing
Transaction expected to close in the first half of next year, subject to regulatory approval
Approvals
McGraw Hill and CME Group Boards of Directors have approved the transaction
No shareholder votes required
Closing contingent upon regulatory approvals 5
Delivers Significant Value to Parent Companies and Customers
Immediately accretive to McGraw-Hill post-close
Attractive Financial Break-even on an accretion/dilution basis for CME Group in 2012
Returns Positive market fundamentals and complementary strengths accelerate growth
Optimized corporate structure drives operating efficiency and margin expansion
Combines two complementary index brands into one leading global index platform
Complementary
Over five hundred ETFs with more than $380 billion in ETF AUM
Index Businesses Over $6 trillion in assets benchmarked against the S&P 500 and the DJIA
Extends CME Group access to essential S&P Indices IP and provides S&P Indices the best trading platform for monetizing its IP in equity index futures products Aligned Interests Profit sharing provides economic incentive to both partners to develop and launch successful new products
Combining CME Groups trading platform with S&P and Dow Jones index expertise drives innovation and speeds product development Customer Insight Deep customer knowledge enhances ability to design products to meet customer functionality and liquidity needs
Already serving customers on 6 continents
Global Reach Partners exchange relationships and the CME Globex platform provide global distribution and linkage to high growth emerging markets
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Leverages Complementary Strengths
The combined capabilities of a global leader in the exchange sector and a top index provider create considerable opportunities for expansion
Further expand index product suite across commodities, fixed income, foreign
Strong exchange and credit
Presence in Under-Penetrated
Use multi-channel sales capabilities to grow assets under management tied to
Asset Classes indices and drive trading volume
Ability to offer expanded set of OTC market data offerings
Value-Added Market Data
Expansion of analytical capabilities will support both custom index business and
Business other opportunities
Cross-sell and co-brand products and expand market data services to global network of clients and exchange partners
Expansion
` Partner exchanges help to expand distribution of index offerings for trading in
Through local currencies
Partner
Exchanges ` Index creation and calculation services are attractive for partner exchanges in growing markets further potential to gain in distribution rights for these offerings
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Provides a Platform for Growth and Innovation
Relationships With Leading Exchanges Worldwide
Growth in Global ETF AUM
CBOE
TMX
Green X
BOLSA MEXICANA DE VALORES
MILA
S&P
INDICES
CME GROUP
BM&F BOVERSPA
The New Exchange
RTS Exchange
KRX KOREA EXCHANGE
DME
Dubai Mercantile Exchange
HKE
TOKYO STOCK EXCHANGE
Osaka Securities Exchange
Mercad integrad
Latino American
NSE National stock Exchange of india limited
Bursa Malaysia
Singapore Exchange
ASX
Australian Securities Exchange
Assets, $bn 1,500
US Europe 1,200 Other
900 600 300
0
00 01 02 03 04 05 06 07 08 09 10
Global distribution channels and linkage to high 2010 Global ETF AUM: $1.3 Trillion . growth markets
Europe 20052010 2010 CAGR: 39%
Opportunity for additional non-U.S. product development, cross-border trading and new global alliances Emerging Markets 2005-2010 CAGR: 37%
Source: BlackRock ETF Landscape Industry Review, January 2011
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Presents an Attractive Financial Profile
Attractive Pro Forma
(1) With Upside Potential Financials
Underlying sector has strong historical growth rates
`Global assets under management in ETFs(2): +26%
`Global exchange futures and options trading volume(3): +18%
Revenues:
Joint Venture has a robust and diversified revenue model
> $400M
AUM-based fees: Mutual funds, ETFs, structured products
Transaction-based fees: Listed and OTC derivative contracts
Profit-based fees: CME Group equity complex
Subscription-based fees: Data services and custom indices
Combination offers increased operational efficiencies
Index production platform
`Technology and administrative infrastructure Operating Margin: Data procurement and data distribution
> 50%
Joint Venture will leverage broader McGraw-Hill Markets platform and CME Groups market and customer insight
(1) LTM as of 9/30/2011
(2) BlackRock ETF Landscape Industry Review, January 2011, 2005-2010 CAGR (3) Futures Industry Association Annual Volume Survey, 2010, 2005-2010 CAGR
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Roadmap to Completion / Next Steps
Regulatory filings will be made as soon as possible
Index businesses will operate separately until transaction closes
Relationships with other exchanges will remain in place
Transaction expected to close in the first half of next year, pending regulatory approval
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Summary: Creates Significant Value for All Stakeholders
A leading index provider
Serving global institutional and retail customers
Unique and complementary strengths
Enhanced platform for growth and innovation
Attractive financial profile
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The McGraw-Hill Companies
CME Group
Strategic Joint Venture Between McGraw-Hill and CME Group
Investor Presentation
November 4, 2011
The McGraw-Hill Companies
CME Group
Strategic Joint Venture Between McGraw-Hill and CME Group
Investor Presentation Replay Information
Internet replay available approximately two hours after the end of the call and will remain available for one year
- Go to: www.mcgraw-hill.com/investor_relations or www.cmegroup.com/investor-relations
Telephone replay available through December 5, 2011
- Domestic: 1-800-348-3514
- International: +1-402-220-9676 (long distance charges will apply) No password required