CME’s threat to leave Illinois echoes Sears, CAT

By Ann Saphir

CHICAGO (Reuters) – CME Group Inc’s threat to leave Illinois in the wake of Governor Pat Quinn’s 46 percent hike in the corporate tax rate marks the latest attempt by a large company to wrest concessions from the state.

“I’m going to do what’s in the best interests of shareholders,” CME Executive Chairman Terrence Duffy said Wednesday at the company’s shareholder meeting. “If that means opportunities are greater elsewhere, then we’re going to look at those opportunities.”

Those remarks were “posturing,” a person familiar with the company’s plans said Thursday.

The “C” in CME stands for Chicago, and its downtown trading floor dates to 1848.

Still, playing the squeaky wheel can make financial sense with a governor known for making sweetheart deals with local companies.

After Sears Holdings Corp said last month it was looking at moving its corporate headquarters from Hoffman Estates, Illinois, next year, Quinn told reporters that he was sure something could be worked out for the company.

A week earlier, the state granted a tax break worth about $100 million over 10 years to Motorola Mobility Inc to ensure the handset maker remains in the state.

Caterpillar Inc’s CEO said he plans to keep the equipment manufacturer in Peoria after meeting with Quinn about his concerns.

And last October, as the state’s yawning budget gap loomed, Quinn announced a $3.5 million package to ensure Groupon Inc added 250 new jobs at its Chicago headquarters rather than in offices in other states. Groupon filed last month to go public.



Despite CME’s long ties to Illinois, Duffy could conceivably make good on the threat to leave, analysts said.

Two of CME’s biggest rivals, Manhattan-based NYSE Euronext and Nasdaq OMX Group, match trades in neighboring New Jersey in part to take advantage of the lower tax rate there, Macquarie Capital analyst Ed Ditmire said.

“If it turned out that Michigan, for instance, had much lower tax rates, it’s conceivable they could move certain assets — not necessarily the headquarters, but as they are thinking about investing in new data centers and other centers of trading,” Ditmire said.

Under the new Illinois tax law, put into force in January, corporations are taxed at a 7 percent rate. A new Michigan law signed in May taxes companies at a 6 percent rate. Wisconsin and Indiana have used Illinois’ tax increase to try to woo companies from their Midwestern neighbor.

“We want to be in Chicago, but are concerned about the corporate tax increases,” a spokesman said Thursday when queried about Duffy’s comments.

The tax hike means an extra $50 million on the CME’s tax bill each year. Quinn also raised the personal income tax rate, which could make it harder to recruit employees, the CME and others have said. (Reporting by Ann Saphir and Karen Pierog; Editing by Jan Paschal)