Singapore Exchange To Make Formal Offer For Baltic Exchange

By Costas Paris 

NEW YORK -- Singapore Exchange Ltd. will make a formal offer for the Baltic Exchange by the middle of this month in a move that could see another historic London marketplace end up in foreign hands, two people involved in the matter said Wednesday.

"The deal is mostly done and the SGX is putting together an offer of around $100 million," one of those people said.

SGX was a late entrant in the race for the Baltic. Other suitors included Platts, a division of S&P Global Inc., CME Group Inc., the operator of the Chicago Mercantile Exchange; and state-run conglomerate China Merchants Group, the people said.

SGX and the Baltic entered exclusive talks on May 25.

If the deal is sealed, the transaction would represent the second sale in recent years of a storied London exchange to an Asian operator. In 2012, Hong Kong Exchanges & Clearing Ltd. bought the London Metal Exchange.

The 272-year-old Baltic Exchange is credited with helping expand British trade during the country's imperial heyday. 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 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 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 pinstripe-wearing brokers of an earlier era.

Shareholders include some of the biggest players in shipping, such as owners, charterers and brokers. Clarksons Platou, the world's leading provider of shipping services; Royal Bank of Scotland Group PLC; Louis Dreyfus and some of the biggest Greek shipping magnates all hold seats.

A deal would significantly boost SGX's derivatives business and further advance Singapore's ambitions of becoming a global maritime financial center. It is also the first big acquisition attempt by Singapore Exchange since its unsuccessful, US$8 billion bid for Australian bourse operator ASX Ltd. in 2011.

Write to Costas Paris at [e-mail]

(END) Dow Jones Newswires

August 03, 2016 08:20 ET (12:20 GMT)

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