SGX submits non-binding bid for Baltic Exchange

The Singapore Exchange (SGX) logo at SGX Centre.
The Singapore Exchange (SGX) logo at SGX Centre. PHOTO: BUSINESS TIMES FILE

Acquisition could give its derivatives business a boost and strengthen Singapore as maritime hub, say analysts

The Singapore Exchange (SGX) is in talks to buy The Baltic Exchange, a move that could bolster its derivatives business and strengthen Singapore as a maritime hub.

The bourse said yesterday that it has submitted a non-binding bid, adding that discussions are still preliminary.

The Baltic Exchange, headquartered in London, is the world's source of maritime market information. Its daily rates and indices are used in the pricing of freight contracts.

There are other bidders for the exchange, which is valued at £84 million (S$164 million), based on a potential bid from the London Metal Exchange last year, media reports say.

The SGX declined to comment on the bid.

Competing suitors include the world's largest futures exchange operator CME Group, Intercontinental Exchange and Platts.

Analysts say the exchange's freight derivatives business is an appealing target for the SGX, especially as stock markets have been in the doldrums. The acquisition could help strengthen the SGX's derivatives business, which accounts for around 40 per cent of its revenue.

Barclays economist Leong Wai Ho believes SGX is pursuing a strategy to broaden the pool of instruments that can be traded here.

"An SGX tie-up or acquisition would make sense as The Baltic Exchange is already widely used as a settlement platform for freight derivative trades and also for benchmarking physical contracts in the global maritime marketplace," he said.

Analysts also noted that the acquisition would be the first major outbound investment by SGX since chief executive Loh Boon Chye took over last July, and since its unsuccessful $10 billion bid for the Australian Stock Exchange in 2011.

"It would be the first time SGX is making a bid for a derivatives exchange. If successful, the combined entity would be a stronger player vis-a-vis CME, the world's largest derivatives market," said Gibson, Dunn & Crutcher partner Robson Lee.

Dr Ernest Kan, chief of operations for clients and markets at Deloitte Singapore, noted that the acquisition would "complement the exchange's iron ore swaps and futures business... (and) lend weight to SGX's commodities products business and open up doors for future listings from this sector".

Mr Chua Chye Poh, chief executive of shipbroker Eastport Global, said the deal could give Singapore a "very big brand name" and help lift the status of the shipping industry. Eastport provides freight information to The Baltic Exchange.

The Baltic Exchange said that no formal offer had been received. It has appointed Nomura International and Norton Rose Fulbright as advisers.

SGX shares closed up 13 cents, or 1.9 per cent, to $7.14 yesterday.

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A version of this article appeared in the print edition of The Straits Times on February 27, 2016, with the headline 'SGX submits non-binding bid for Baltic Exchange'. Print Edition | Subscribe