CME Group is preliminary talks to buy energy/precious metals market Nymex, CME announced Monday, in a statement.

Under terms being discussed, CME Group Inc. (NYSE: CME), the world's largest derivatives exchange, would pay Nymex Holdings, Inc. (NYSE: NMX) $36 per share in cash and 0.123 of a CME common share, which would value the deal at about $11 billion, Reuters reported Monday.

Nymex shares rose $9.01 to $116.17 on the news, while CME's shares fell $12.77 to $616.01 in Monday afternoon trading.

CME Group was created in July 2007 via the merger of the Chicago Mercantile Exchange and the Chicago Board of Trade in a $9.3-billion deal. Nymex, which is short for the New York Mercantile Exchange, went public in November 2006.

Nymex is the world's largest, physical commodities futures exchange, and features contracts for crude oil, gasoline, natural gas, and electricity; and precious metals such as gold, silver and copper. CME's product strengths include interest rates, foreign exchange, stock indexes, and agricultural commodities.

A logical deal

Independent stock analyst C. Leonard Bauer told BloggingStocks Monday a potential CME/Nymex could get done, "as the logic is there". Bauer added that he does not have a rating on either company, nor does he own shares of either company.

Nymex's products have almost no overlap with CME's strengths in interest rates, foreign exchange, stock index and agricultural commodities, he said. Almost, he underscored. However, a CME/Nymex deal would have "an 80% or better market share in U.S. futures and futures on option volume," he said. Any proposed deal is subject to review by the U.S. Department of Justice.

"The onus would be on CME to demonstrate to public officials how in the electronic age, the number of electronic exchanges would counteract CME's market dominance in that segment," Bauer said. "The issue is not one of global competition. The issue is 'how will a CME/Nymex merger lower trading prices and improve services?' If they can demonstrate that, then that dimension, and the product mix, and economies of scale points would most likely put the deal in motion."