MHP Mcgraw Hill Financial, Inc.

By Costas Paris and Alistair MacDonald 

Another iconic London exchange is in play.

Baltic Exchange Ltd., a 272-year-old shipping marketplace credited with helping expand British trade during the country's imperial heyday, has attracted a handful of potential suitors interested in its globally traded shipping contracts and indexes.

Singapore Exchange Ltd. said Friday it made a nonbinding bid for the Baltic exchange, but didn't disclose details. Platts, a division of McGraw Hill Financial Inc., and CME Group Inc., the operator of the Chicago Mercantile Exchange, are also considering making offers but haven't done so yet, according to people familiar with the matter.

The Baltic exchange confirmed it had received "a number of exploratory approaches and that it is now in confidential discussions with selected third parties regarding its future strategy and ownership."

Interest in the exchange comes in the shadow of much bigger consolidation of global exchanges that is under way just a few minutes' walk away in London's financial district. London Stock Exchange Group PLC and Deutsche Börse AG disclosed this week that they are in advanced talks to merge in a deal that could create Europe's largest exchange with a value of $28 billion.

The Baltic exchange is tiny by comparison. Bids are expected to range between $100 million and $120 million, people familiar with the matter said.

Despite its small size and relative obscurity today, the Baltic in its prime was a global exchange powerhouse. Founded in 1744, it grew out of one of the many coffee shops concentrated in the City of London, the capital's historic trading center, where merchants congregated to conduct business.

It matured into a more formal market and was later credited as being a driving force in Britain's rise as a global trading power, matching merchants with shipowners and serving as a venue for traders to swap tips and information.

More recently, the exchange pioneered a derivatives market linked to freight. The Baltic Freight Index was launched in 1985, and was followed by a series of other freight market indexes, used to trade and settle shipping freight contracts. The Baltic Dry Index, for instance, provides daily freight rates for dry-bulk cargoes like iron ore, coal, cement and grains. The index has long served as a benchmark for the health of the shipping industry and for global trade more broadly.

For many decades, the Baltic exchange was housed in a grand marble building in the heart of London's financial district. That building was destroyed in a bombing by the Irish Republican Army in 1992.

As modern communications and electronic trading rendered physical trading floors largely redundant, the Baltic exchange for years held on to a reputation in London's financial district as a clubby redoubt for the pinstriped-wearing brokers of an earlier era.

Shareholders include some of the biggest players in shipping, including owners, charterers and brokers. Clarksons Platou, the world's leading provider of shipping services; Royal Bank of Scotland Group PLC; Louis Dreyfus Group and some of the biggest Greek shipping magnates all hold seats.

If Singapore Exchange wins out, the transaction would represent the second recent sale of a storied London exchange to an Asian operator. In 2012, the London Metal Exchange was sold to Hong Kong Exchanges and Clearing Ltd.

Last year, LME made its own unsuccessful run at the Baltic. The LME hasn't yet expressed interest in making a fresh bid, according to one person familiar with the matter.

The deal would significantly boost the Singapore exchange's derivatives business and further advance its ambitions of becoming a global maritime financial center. It is also the first big acquisition attempt by Singapore Exchange since its unsuccessful, $8 billion bid for Australian bourse operator ASX Ltd. in 2011.

Nomura Holdings Inc. and Norton Rose Fulbright LLP are advising the Baltic exchange. Investment bank Jefferies is advising the Singapore Exchange.

The exchange is profitable, distributing interim dividends of about GBP9.7 million ($13.45 million) to its 380 members late last year.

In a letter to Baltic members Friday, Guy Campbell, the exchange's chairman, said he hadn't been seeking bidders.

"We have most certainly not sought to create this situation," he wrote, "but we must now deal with it in a professional manner, as you would expect."

--Gaurav Raghuvanshi in Singapore contributed to this article.

Write to Costas Paris at costas.paris@wsj.com and Alistair MacDonald at alistair.macdonald@wsj.com

(END) Dow Jones Newswires

February 26, 2016 13:42 ET (18:42 GMT)

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