Baltic Exchange Attracts Suitors
27 February 2016 - 7:02PM
Dow Jones News
(FROM THE WALL STREET JOURNAL 2/27/16)
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.,
operator of the Chicago Mercantile Exchange, also are considering
making offers, 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 Borse AG disclosed this past 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 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 such as iron ore, coal, cement and grains. The index long
has been a benchmark for the health of the shipping industry and
for global trade more broadly.
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.
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 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
Singapore Exchange.
The exchange is profitable, and distributed interim dividends of
about GBP 9.7 million ($13.5 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."
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Gaurav Raghuvanshi contributed to this article.
(END) Dow Jones Newswires
February 27, 2016 02:47 ET (07:47 GMT)
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