CME Group buys 90 percent of Dow Jones’ index unit for $607 million

CME buys 90 percent of DJ index unit for $607M

NEW YORK — Dow Jones & Co. is selling a 90 percent stake in its stock market index unit to exchange operator CME Group Inc. for $607.5 million, the companies announced Wednesday.

The joint venture will allow the Dow Jones industrial average to keep its famous name through a long-term licensing agreement, the companies said in a statement.

Dow Jones will retain a 10 percent stake and a management role in Dow Jones Indexes. The business offers more than 130,000 stock indexes that are used as benchmarks by investors and licensed for use by mutual funds and other investment products.

The business includes widely watched indexes like the Dow Jones utilities average and the Dow Jones transportation average. It also owns such diverse barometers as the Dow Jones Islamic market index and the Dow Jones European energy index.

The company’s best known index is the industrial average, which began as a basket of 11 stocks in 1884. Today, it includes 30 stocks including Caterpillar Inc., Microsoft Corp. and Wal-Mart Stores Inc., and is used as an indicator by investors around the globe.

Dow Jones & Co. is owned by Rupert Murdoch’s News Corp.

The sale of a prime Dow Jones asset would be among the first since News Corp. bought the publisher in 2007 for $5.7 billion from the families that controlled Dow Jones & Co. Since then the value of the business has plunged. The newspaper industry suffering huge declines in advertising.

News Corp. also owns the Journal, the Fox television network, 20th Century Fox movie studio and media outlets in Europe and Australia.

Under the deal, the joint venture will raise $613 million in debt to pay Dow Jones the $607.5 million sale price. The deal is expected to be finalized in the first quarter.

Dow Jones began searching for a buyer of its index business late last year, and a big question was whether the buyer would be able to keep the iconic industrial average’s name.

The Dow name comes from Dow Jones & Co. co-founders Charles Dow and Edward Jones. The industrial average is synonymous with the stock market for many investors, and is a fixture at the bottom of TV screens during financial news broadcasts.

While it’s not the most comprehensive measure of the market — the Standard & Poor’s 500 index is widely used as a broader benchmark — the Dow Jones industrials are perhaps the most widely followed metric.

For instance, investors were glued to the Dow during the market convulsion of late 2008. On Sept. 29 of that year, nine days after the collapse of investment bank Lehman Brothers, the Dow plunged 777.68 points, its largest one-day point drop ever. About two weeks later on Oct. 13, the index shot up 936.42 points, in its biggest-ever one-day gain.

Chicago-based CME Group owns the Chicago Mercantile Exchange, the Chicago Board of Trade and the New York Mercantile Exchange, which it acquired in August 2008. CME also offers a range of global benchmark products across all major asset classes, including futures and options based on interest rates, equity indexes, foreign exchange, energy, agricultural commodities, metals, weather and real estate.