updated 4/22/2005 10:45:54 AM ET 2005-04-22T14:45:54

New York private-equity firm Blackstone Group and Boston venture capital firm Battery Ventures VI LLP have offered to buy a 20 percent stake in the New York Mercantile Exchange for $185 million, people close to the Nymex said.

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The early-stage offer, made in a joint letter sent to top officials at the world’s largest energy-futures exchange, envisages splitting the equity in Nymex seats from their trading rights, valuing them together at $1.945 billion.

Blackstone and Battery also offered to buy trading rights for up to 75 of Nymex’s 816 seats for $1.25 million apiece, bringing the total potential value of the deal to $278.8 million.

Nymex spokeswoman Anu Ahluwalia wouldn’t comment, and it isn’t clear how the exchange will respond to the offer, which hasn’t been reviewed by the board and remains subject to due diligence. Nymex confirmed a week ago that more than one private-equity firm had approached the exchange, but declined to name them.

Under the proposed deal, Blackstone and Battery, which partnered up five years ago to buy about a third of the London International Financial Futures and Options Exchange and overhaul its business, would receive a stake in the Nymex in the form of a preferred security convertible into equity.

Nymex would cut the size of its board to 11 from the current 24 and give two of the seats to Blackstone and Battery, which would then guide the exchange toward an initial public offering, the sources said.

Nymex earned $27.4 million on revenue of $237.4 million last year, up from $8.9 million on revenue of $184.2 million in 2003.

Some powerful members of Nymex, home to the world’s main crude-oil futures contract, believe the exchange needs outside help to define its business strategy as the global energy marketplace grows more competitive. Nymex members credited Mark Fisher, an influential Nymex seatholder and owner of MBF Clearing Corp. — one of the exchange’s biggest trading and clearing firms — with getting talks off the ground with Blackstone and Battery.

The firms have an established track record. In June 2000, they joined forces to invest $91 million in Liffe and more than tripled their money when European exchange Euronext acquired Liffe the following year.

Blackstone and Battery, which encouraged Liffe’s transition from floor-based to electronic trading, have agreed in the Nymex proposal to keep its New York trading pits open for 10 years.

Nymex has made its commitment to the pits a selling point as competition heats up with London-based rival International Petroleum Exchange, which went fully electronic earlier this month.

An IPO announcement in March by the IPE’s owner and Nymex competitor, Atlanta-based IntercontinentalExchange Inc., has raised concerns among Nymex members that they may soon face a better-capitalized adversary.

Also in March, futures-industry giant Chicago Mercantile Exchange said it might add energy contracts to its product lineup in the not-too-distant future, since its non-compete agreement with Nymex expires in June 2006.

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