By Ian Walker and Costas Paris

 

The Singapore Exchange Ltd. and Baltic Exchange Ltd. Monday confirmed that they have agreed the terms of a deal for the Singapore Exchange to buy the Baltic Exchange for 87 million pounds ($114 million) in cash.

Under the deal, accepting Baltic Exchange shareholders will get GBP160.41 in cash for each share, which includes a special dividend payable by the Baltic Exchange. The special dividend is subject to approval by Baltic Exchange shareholders and is conditional on successful completion of the proposed acquisition, the companies said in a joint statement.

The Wall Street Journal reported earlier this month that the Singapore Exchange will make a formal offer for the Baltic Exchange by the middle of this month, citing two people involved in the matter.

SGX and Baltic began exclusive talks on May 25.

Singapore Exchange Chief Executive Loh Boon Chye said: "We look forward to working together with the Baltic Exchange to develop new products, benchmarks and services to the benefit of Baltic Members, SGX shareholders and the shipping community worldwide."

Baltic Exchange Chairman Guy Campbell said: "The proposed acquisition will accelerate the growth and development of the Baltic Exchange beyond what it could achieve on its own...SGX has committed to retaining the Baltic's ethos as a membership organization, retaining our London headquarters and further consolidating the Baltic's value, influence and reach within the global shipping community."

"Following extensive consultations with stakeholders, over the past few months, the board believes that SGX's offer is in the best interests of Baltic Exchange shareholders, members, panelists, employees and of the broader London maritime hub, from where it will continue to be based," Mr. Campbell added.

The transaction, if completed, would represent the second sale in recent years of a storied London exchange to an Asian operator. In 2012, Hong Kong Exchanges & Clearing Ltd. bought the London Metal Exchange.

The 272-year-old Baltic Exchange is credited with helping expand British trade during the country's imperial heyday. 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 acclaimed as a driving force in Britain's rise as a global trading power, matching merchants with ship-owners 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 created 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 such as 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 pinstripe-wearing brokers of an earlier era.

Shareholders include some of the biggest players in shipping, such as owners, charterers and brokers. Clarksons Platou, a global provider of shipping services; Royal Bank of Scotland Group PLC; Louis Dreyfus and some of the biggest Greek shipping magnates all hold seats.

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

 

-Write to Ian Walker at ian.walker@wsj.com; @IanWalk40289749 and Costas Paris at costas.paris@wsj.com

 

(END) Dow Jones Newswires

August 22, 2016 09:32 ET (13:32 GMT)

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