SGX in talks to buy Baltic Exchange

SINGAPORE — Bourse operator Singapore Exchange (SGX) is in talks to buy the storied Baltic Exchange, the hub of the global shipping market, as it looks to diversify its revenue sources.

SGX said yesterday it had submitted a non-binding bid for the acquisition of the Baltic Exchange but emphasised that the discussions are preliminary. “There is no certainty or assurance that the possible transaction will materialise or that any definitive or binding agreement will result from such discussions,” it said.

Founded in 1744, the London-based Baltic Exchange is owned by 380 shareholders, many from the shipping industry. While the shipping market is currently suffering from overcapacity and sluggish global trade, the Baltic Exchange has carved out an industry-leading position. It produces benchmark indexes, such as the Baltic Dry, that are widely used to trade and settle shipping contracts. Sources told Reuters that the Baltic Exchange could be worth about £84 million (S$164.8 million).

SGX faces potential competition for the Baltic Exchange from other major exchanges such as Chicago-based CME Group and Atlanta-based ICE. The London Stock Exchange has shown interest but is unlikely to progress due to its possible merger with Deutsche Borse.

If successful, the deal would the first major outbound investment for CEO Loh Boon Chye since he took over last July at the helm of the SGX, which has struggled to attract large initial public offerings and generate significant daily stock turnover. A takeover of another exchange will allow SGX to grow revenue beyond a limited domestic market.

In 2011, SGX failed in its A$8 billion (S$8.1 billion) bid for the Australian Stock Exchange after Canberra rejected the deal on national interest grounds.

Separately, SGX announced yesterday it is proposing that mainboard companies allocate to retail investors a minimum 10 per cent of shares in their initial public offerings, up to a maximum of S$100 million. This is the second consultation on the introduction of a minimum IPO allocation to retail investors, after the first one in 2012 proposed a 5 per cent retail allocation.

“While market conditions may have been uncertain of late, this initiative is for the long term and is part of overall enhancements to the Singapore stock market,” said Mr Loh. AGENCIES