UPDATE 2-CBOE offers to buy $300 mln stock from ex-members

* CBOE to buy up to 13.3 million shares at $22.50 each

* CBOE will fund the tender offers from IPO proceeds

* Targeted shares are owned by former CBOE members

* “I think I am going to pass” – former CBOE member
(Recasts throughout; adds comments)

By Doris Frankel and Ann Saphir

CHICAGO, Oct 13 (BestGrowthStock) – CBOE Holdings Inc (CBOE.O: ) on
Wednesday offered to buy stock valued at as much as $300
million from former members in a long-planned tender offer, but
some of those members said they weren’t selling.

CBOE Holdings, the parent of the Chicago Board Options
Exchange, will buy as many as 13.3 million shares at $22.50
each from former owners who received the stock in return for
giving up memberships when the exchange went public in June.

The shares, technically known as class A-1 and class A-2
common stock, cannot be sold on the public market until the
expiration of lockups in December 2010 and June 2011.

The tender offer provides an early out for those former
members who want quick cash.

But the price of the tender offer is about 22 percent below
what shares fetched in the initial public offering, when
expectations for trading volume were higher than they are now.

Chuck Sorsby, who once had several memberships and now owns
400,000 CBOE shares, said he’s too bullish on the company to
let his stock go at such a price.

“I think I am going to pass,” Sorsby said in a telephone
interview. “I’m inclined to think they can grow earnings over
time, that the market will grow over time, and that the
takeover issue is still out there,” he added, referring to
persistent speculation that CBOE could be a takeover target.

CBOE Holdings made its debut on June 15, the last major
North American exchange to become a publicly traded company.

Analysts said it will be key to gauge the tender’s
popularity among former CBOE seat owners and members of CME
Group Inc’s (CME.O: ) Chicago Board of Trade who also received
restricted shares at the IPO.

“Now we will have to wait and see what level of demand
there is for members to sell at the $22.50 level,” said
Ticonderoga Securities analyst Chris Allen in a research note.

A fully subscribed tender offer could provide a 5-cent
per-share lift to CBOE’s expected earnings in 2011 and 2012,
Allen said.

“We will wait to see what the results are before adjusting
estimates,” said Allen, who estimates CBOE’s third-quarter
earnings at 22 cents per share, a penny less than the consensus
23-cent forecast according to Thomson Reuters I/B/E/S.

Allen said there has been some speculation that CBOE would
pay a special dividend in lieu of a tender or with cash left
over if a tender offer was undersubscribed.

“After talking with the company, this appears to be pure
speculation, likely driven by certain members,” Allen said.

“We believe CBOE would be much better served utilizing
excess cash post-tender in a share repurchase or holding it to
fund growth opportunities,” Allen added.

The tender offers cover 6,648,570 shares each of class A-1
and class A-2 common stock, and is set to expire on Nov. 12,
CBOE said in a statement. CBOE will report third-quarter
earnings on Nov. 4.

On June 18, CBOE Holdings raised $301.4 million in net
proceeds by issuing about 11.4 million shares of its common
stock to the public in an IPO.

Shareholders sold an additional 2.1 million shares in the
IPO, resulting in a public float of about 13.5 million shares.

CBOE Holdings shares rose 1.39 percent to $22.54 in
afternoon trading on the Nasdaq.
(Editing by James Dalgleish)

UPDATE 2-CBOE offers to buy $300 mln stock from ex-members