Baltic Exchange Attracts Suitors

   (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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