The Baltic Exchange on Friday confirmed that it had received a number of “exploratory approaches” after Singapore Exchange Ltd (SGX) revealed it was seeking to buy the business which has been the hub of the global shipping market for centuries.
Reuters on Thursday exclusively reported that the Baltic Exchange had held talks with SGX and other potential buyers, months after sources had said the London Metals Exchange (LME) made an approach to buy it.
“The Baltic Exchange confirms that it has received a number of exploratory approaches and that it is now in confidential discussions with selected third parties regarding its future strategy and ownership,” it said in a statement. “There can be no certainty that an offer will be made or the terms on which any offer might be made.”
The Baltic had previously rebuffed approaches from the LME.
SGX on Friday said in a statement that it had submitted a non-binding bid for the acquisition of the Baltic, which sources had previously estimated could be worth about £84 million (US$116.52 million).
Talks were in a preliminary stage, SGX said.
A possible purchase by SGX would shore up the Southeast Asian exchange operator’s derivatives business.
SGX’s derivatives revenue grew 29 percent in the half ending Dec 31. last year, contributing nearly 41 percent to SGX’s total revenue, while securities revenue inched up 2 percent.
The Baltic, founded in 1744, is owned by about 380 shareholders, many from the shipping industry. It produces daily benchmark rates and indices that are used across the world to trade and settle freight contracts.
“At this stage, no formal offer has been received, but when considering any approach the board will first carefully consider the views and interests of all its stakeholders,” Baltic Exchange chairman Guy Campbell said in the statement.
Campbell wrote separately to the Baltic’s wider members, comprising about 650 companies that include the shareholders and apologized for not communicating with them sooner.
“Although we have received expressions of interest, I must make it quite clear that the discussions may very well lead nowhere, in which case we shall continue with business as usual,” Campbell wrote in an open letter on Friday. “We have most certainly not sought to create this situation, but we must now deal with it in a professional manner, as you would expect.”
Clearing houses and exchanges are looking for a way to become more profitable at a time of growing regulatory scrutiny and weak commodities markets.
A deal would be a good fit for SGX, which has struggled to attract large initial public offerings and boost daily stock turnover but has a fast-growing derivatives business, analysts said.
“In our view, the rationale for owning the information and key index provider in the shipping market makes sense especially given Singapore’s position as a trading hub, SGX’s dominance of the iron ore contract and efforts to develop LNG [liquefied natural gas] trading,” Morgan Stanley analysts said in a report. “We see the potential for SGX to develop more products if it were to own Baltic Exchange.”
Other potential bidders for the Baltic include CME Group, Intercontinental Exchange Inc and Platts, sources told reporters.
All three declined to comment.
It was unclear who had initiated the talks.
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