Baltic Exchange Gets a Bid From Singapore, and Others May Follow -- 2nd Update
27 February 2016 - 5:57AM
Dow Jones News
By Costas Paris and Alistair MacDonald
Another iconic London exchange is in play.
Baltic Exchange Ltd., a 272-year-old shipping marketplace
credited with helping expand British trade during the country's
imperial heyday, has attracted a handful of potential suitors
interested in its globally traded shipping contracts and
indexes.
Singapore Exchange Ltd. said Friday it made a nonbinding bid for
the Baltic exchange, but didn't disclose details. Platts, a
division of McGraw Hill Financial Inc., and CME Group Inc., the
operator of the Chicago Mercantile Exchange, are also considering
making offers but haven't done so yet, according to people familiar
with the matter.
The Baltic exchange confirmed it had received "a number of
exploratory approaches and that it is now in confidential
discussions with selected third parties regarding its future
strategy and ownership."
Interest in the exchange comes in the shadow of much bigger
consolidation of global exchanges that is under way just a few
minutes' walk away in London's financial district. London Stock
Exchange Group PLC and Deutsche Börse AG disclosed this week that
they are in advanced talks to merge in a deal that could create
Europe's largest exchange with a value of $28 billion.
The Baltic exchange is tiny by comparison. Bids are expected to
range between $100 million and $120 million, people familiar with
the matter said.
Despite its small size and relative obscurity today, the Baltic
in its prime was a global exchange powerhouse. Founded in 1744, it
grew out of one of the many coffee shops concentrated in the City
of London, the capital's historic trading center, where merchants
congregated to conduct business.
It matured into a more formal market and was later credited as
being a driving force in Britain's rise as a global trading power,
matching merchants with shipowners and serving as a venue for
traders to swap tips and information.
More recently, the exchange pioneered a derivatives market
linked to freight. The Baltic Freight Index was launched in 1985,
and was followed by a series of other freight market indexes, used
to trade and settle shipping freight contracts. The Baltic Dry
Index, for instance, provides daily freight rates for dry-bulk
cargoes like iron ore, coal, cement and grains. The index has long
served as a benchmark for the health of the shipping industry and
for global trade more broadly.
For many decades, the Baltic exchange was housed in a grand
marble building in the heart of London's financial district. That
building was destroyed in a bombing by the Irish Republican Army in
1992.
As modern communications and electronic trading rendered
physical trading floors largely redundant, the Baltic exchange for
years held on to a reputation in London's financial district as a
clubby redoubt for the pinstriped-wearing brokers of an earlier
era.
Shareholders include some of the biggest players in shipping,
including owners, charterers and brokers. Clarksons Platou, the
world's leading provider of shipping services; Royal Bank of
Scotland Group PLC; Louis Dreyfus Group and some of the biggest
Greek shipping magnates all hold seats.
If Singapore Exchange wins out, the transaction would represent
the second recent sale of a storied London exchange to an Asian
operator. In 2012, the London Metal Exchange was sold to Hong Kong
Exchanges and Clearing Ltd.
Last year, LME made its own unsuccessful run at the Baltic. The
LME hasn't yet expressed interest in making a fresh bid, according
to one person familiar with the matter.
The deal would significantly boost the Singapore exchange's
derivatives business and further advance its ambitions of becoming
a global maritime financial center. It is also the first big
acquisition attempt by Singapore Exchange since its unsuccessful,
$8 billion bid for Australian bourse operator ASX Ltd. in 2011.
Nomura Holdings Inc. and Norton Rose Fulbright LLP are advising
the Baltic exchange. Investment bank Jefferies is advising the
Singapore Exchange.
The exchange is profitable, distributing interim dividends of
about GBP9.7 million ($13.45 million) to its 380 members late last
year.
In a letter to Baltic members Friday, Guy Campbell, the
exchange's chairman, said he hadn't been seeking bidders.
"We have most certainly not sought to create this situation," he
wrote, "but we must now deal with it in a professional manner, as
you would expect."
--Gaurav Raghuvanshi in Singapore contributed to this
article.
Write to Costas Paris at costas.paris@wsj.com and Alistair
MacDonald at alistair.macdonald@wsj.com
(END) Dow Jones Newswires
February 26, 2016 13:42 ET (18:42 GMT)
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