The Singapore Exchange Ltd is tying up with London's main bourse to make a joint bid for the London Metal Exchange, as the world's largest metal market seeks a suitor in a deal that could be worth £1bn.
The consortium has appointed a bank to advise with the auction expected to attract rival offers, according to Reuters sources.
The joint bid underscores the ambitions of both exchanges to diversify into the fast-growing space of metals trading, as traditional businesses of equity and derivatives trading faces increasing competition.
Both the SGX and the LSE are coming off failed merger attempts, which took place earlier this year amid a flurry of exchange auctions that were prompted by loss of market share across the industry to alternative trading venues.
"This is a joint bid, so I guess SGX would have learned some lessons from the ASX bid," said Roger Tan, managing director at SIAS Research in Singapore.
SGX, led by experienced dealmaker Magnus Bocker, has been trying to raise the profile of Asia's second-largest listed bourse and compete against its larger rival in Hong Kong.
Bocker was the man who stitched together seven Nordic bourses to create OMX, later sold to NASDAQ.
But his attempts to buy ASX Ltd was rejected by the Australian government five months ago.
"To a certain extent, there is some necessity for SGX to try to grow both organically and by M&A. LME has proven over the years to be a credible exchange. If anyone is able to acquire the platform, then it will be able to use the platform to expand its own business," Tan added.
SGX shares were trading down 1.5 percent at S$6.62, giving it a market value of about $5.6 billion. LSE is valued at $3.5bn.
LME's pre-tax profit in 2010 fell 28 per cent to £12.5m. Still the exchange's pre-eminent position in the world of metals trading will make it a much sought after asset.
"But since LME is already an established arena, it won't come cheap," Tan added.
The LME, the world's biggest market for industrial metals, said last week that it was considering a sale, with an expected price tag of around 1 billion pounds. Chief Executive Martin Abbott told Reuters on Thursday more than nine potential suitors have shown an interest in acquiring LME.
SGX declined to comment. Calls and an email to the London Stock Exchange's media hotline were not immediately answered. The source declined to be named as the discussions were confidential.