Australian fund manager Caledonia (Private) Investments Pty. Ltd. said on Thursday it would vote against Chicago Mercantile Exchange Holdings Inc.'s US$10.5 billion offer to buy CBOT Holdings Inc.
Caledonia's near 6.5 percent stake in CBOT, which runs the No. 2 U.S. futures exchange, will be crucial when the bourse's members and shareholders vote on July 9 on the transaction.
We think it is a low bid, Caledonia Managing Director William Vicars told Reuters in an interview.
Earlier this week, the CBOT board turned down a re-submitted rival merger proposal from Intercontinental Exchange Inc. (ICE), saying the offer was not superior to CME's bid.
We are not commenting on whom we agree with. At the moment what the CME has bid isn't attractive to us, Vicars said. But he declined to say at what price Caledonia would be a seller of its stake, currently worth more than US$700 million.
Caledonia also owns a less than 5 percent stake in Wall Street Journal owner and takeover target Dow Jones & Co., for which media mogul Rupert Murdoch's News Corp. has bid US$5 billion.
Murdoch, we would think, can pay a lot more, if there are competitive tensions for it (Dow Jones), Vicars said.
I don't think many people like bidding against Rupert. We are sort of sitting with a very nice position and watching.
Analysts are concerned that Caledonia, along with other smaller opposing shareholders, could potentially derail the deal for CBOT, which runs the Chicago Board of Trade exchange.
Caledonia manages about A$3.5 billion ($3 billion) in Australian and global stocks, for about 400 wealthy investors.
Caledonia has acquired a reputation for being an activist shareholder. Last year, it was instrumental in getting the chief executive of the Sydney futures exchange operator, SFE Corp. made head of the company that acquired it, Australian stock exchange operator ASX Ltd. Caledonia still holds stake in ASX.
Earlier this year, Caledonia forced Australia and New Zealand Banking Group Ltd. to raise its bid price for online stock broker E*Trade Australia Ltd. by 6 percent.
I wouldn't consider we are activist at all. All we do is use our votes. And if someone takes over our business, we want to be paid a fair price for it, Vicars said, adding that price was the issue in the CBOT/CME deal.
We haven't entered into any discussions with anyone about the (CME) management. We think the CME management have done a particularly good job over a reasonably long period of time, the 41-year-old ex-Bankers Trust staffer said.
Caledonia has held companies such as ports operator Patrick Corp., insurer Promina Group and many others, which have eventually been acquired.
It is clearly an endorsement when people are trying to buy the company you own, Vicars said.
Caledonia is a big investor in stock exchange-related businesses.
They have good margins and it is relatively new asset class, Vicars said. Apart from ASX, Caledonia also own stakes in ICE and Spanish stock market operator Bolas y Mercados de Valores BME.
Caledonia has built up a team of 23 investment professionals after starting with just three. It does not reveal the returns it has generated, and does not accept institutional money.
Generally, the investors are happy, said Vicars.
According to BRW Rich 200 list, some 20 members of the Darling family now own 28 percent of Caledonia, which was established in 1992.
The Darling family's wealth was founded by Scottish migrant John Darling who invested in Broken Hill Proprietary Company -- later to become BHP Billiton Ltd. The family is now has a net worth of A$651 million, according to BRW.
Caledonia has no plans to float its business, though some recent fund management share sales have attracted huge demand. We are very happy with the way we are structured, Vicars said.
Trying to buy assets that are particularly good at cheap prices is the biggest challenge. That was a challenge when we started and it will continue to be a challenge.