Chinese state-run conglomerate China Merchants Group (招商局集團) has made an informal bid to buy London’s Baltic Exchange, becoming the latest contender for the business that has been the hub of the global shipping market for centuries, two sources told Reuters.
The approach was made by the group’s subsidiary China Merchants Securities Co (招商證券), according to the sources, who declined to be identified as the matter is not public.
“They are the latest [suitor] and certainly, with such a massive group, it shows how this is heating up,” one source said.
An acquisition of the Baltic, which was founded in 1744, would give the Chinese conglomerate ownership of the industry’s benchmark indices — which could be further commercialized — and greater access to the multibillion-dollar freight derivatives market.
It is the latest Chinese company to look at shipping and commodities targets in Europe, aiming to take advantage of a market downturn that has pushed down valuations of some firms.
China Merchants Securities, which is listed in Shanghai, did not respond to requests for comment.
A spokesperson for China Merchants Group in Shenzhen said on Wednesday he was not aware of any bid for the Baltic Exchange, adding if there was a bid it would be processed by one of the group’s units, which are listed in various locations such as Shanghai, Hong Kong and Singapore.
A Baltic spokesperson said the exchange “to date hasn’t commented on the identity of anyone involved in the process and declines to comment on whether or not the Baltic is in discussion with [China Merchants Group]”.
On Feb. 26 the privately held Baltic Exchange confirmed it had received a number of “exploratory approaches” after the Singapore Exchange Ltd (SGX) revealed it was seeking to buy the business.
Both statements came a day after Reuters exclusively reported the Baltic had held talks with SGX and other potential buyers including CME Group, ICE and Platts.
In October last year, sources said the London Metal Exchange (LME) had made an approach to buy the Baltic.
China Merchants Group is among the country’s biggest conglomerates, with interests spanning ports, shipping and financial services.
In December last year, Chinese authorities approved its acquisition of state-run logistics group Sinotrans & CSC Holdings Co (中外運航運), part of efforts by Beijing to make sprawling government-controlled firms more efficient as economic growth slows.
That deal placed China Merchants’ estimated assets worth 624 billion yuan (US$96 billion) and Sinotrans & CSC assets of about 109 billion yuan under one roof.
The two sources said China Merchants Securities was willing to pay a premium above other bidders to acquire the Baltic.
Separate sources had previously estimated the deal could be worth about £84 million (US$118 million).
China Merchants still faces competition from SGX and others such as the LME, which was bought by Hong Kong Exchanges and Clearing in 2012 for US$2.2 billion.
The Baltic 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.
Any acquisition of the Baltic could face opposition from freight brokers who would fear some loss of their business.
In the Baltic’s last annual report in the year to end-March last year it recorded an after-tax profit of £1.3 million versus £901,809 in 2014.
Shipping industry sources said it could increase profitability, partly by charging more to data users
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