In Dry Bulk Market 07/03/2016
Kapoor said shipping derivatives contracts have slumped, both in value and traded contract terms. “The takeover talks,” he said, “are a result of the partly poor state of the industry.”
As Deutsche Borse and IntercontinentalExchange prepare to duke it out to acquire the London Stock Exchange, Singapore’s bourse has set its sights on another, smaller target in the British capital. It wants to buy Baltic Exchange, a major provider of maritime transport-related information and trading services.
Singapore Exchange “has submitted a nonbinding bid for the acquisition of the Baltic Exchange,” the bourse said in a brief statement issued last Friday. SGX aims to bolster its operations amid a slump in the equity market. Net profit for the quarter ended December fell 3% on the year to 83.7 million Singapore dollars ($60 million), and investor sentiment remains gloomy after stocks plunged in early 2016.
Acquiring Baltic Exchange could lead to synergies. SGX provides clearing services for over-the-counter derivatives used in the shipping industry, including charter forward contracts for dry bulk ships. The purchase could also jibe with the bourse’s commodity trading business, such as growing iron-ore futures.
This is SGX’s first acquisition attempt after its failed effort to buy the Australian Securities Exchange, which fell through in 2011. That bid was valued at 8.4 billion Australian dollars (around $8.9 billion at the time).
It is also the first notable expansion move by SGX chief executive Loh Boon Chye, who took office in July 2015.
“Poor state”
“Singapore has already established itself as a key maritime center across the Suez, and the takeover ties in well with Singapore’s ambition to cement its position as an alternate global maritime hub to London,” said Rahul Kapoor, equity research director at London-based Drewry Shipping Consultants.
But SGX appears to be one of several suitors. Baltic Exchange said 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.” Media reports earlier named CME Group, ICE and Platts as possible bidders.
“As discussions are still preliminary, there is no certainty or assurance that the possible transaction will materialize or that any definitive or binding agreement will result from such discussions,” SGX said.
Baltic Exchange, which counted 645 member companies as of the end of March 2015, is best-known for its Baltic Dry Index — the benchmark indicator tracking shipping rate of dry bulk carriers that transport commodities such as iron and coal. The exchange recorded net assets of 25.95 million pounds (about $38 million at the time) for the year ended March 2015, with revenue of 6 million pounds and net profit of 1.3 million pounds.
Source: Nikkei
