Morgan Stanley and Rosneft, Russia’s largest oil company, issued a joint statement on Monday saying they had had mutually terminated their contract for the oil firm to buy MS’s oil trading and storage business after they could not get U.S. regulatory approval for the deal amid political tensions over Russia’s action in Ukraine.
Morgan Stanley noted it would continue to operate the business, which includes an inventory of oil and a 49% stake in tanker operator Heidmar Holdings. Of note, Morgan Stanly had reached retention agreements with employees scheduled to be transferred to Rosneft after the sale, even guaranteeing some pay, according to knowledgeable sources.
Tiger Legatus Master Fund was up 0.1% net for the second quarter, compared to the MSCI World Index's 7.9% return and the S&P 500's 8.5% gain. For the first half of the year, Tiger Legatus is up 9%, while the MSCI World Index has gained 13.3%, and the S&P has returned 15.3%. Q2 2021 hedge Read More
Statements from Rosneft and Morgan Stanley
“Having invested substantial efforts in the deal, the parties regret that it could not be completed,” the companies said in their statement.
The companies said the deal won’t proceed “due to an objective impossibility to complete the deal that has arisen as a result of regulatory clearances being refused.” The statement also highlighted that the two firms would “continue to cooperate in other spheres.”
A Morgan Stanley spokesperson said they were “now consider a variety of options for the unit that take into account the interests of the Firm’s shareholders, clients and employees.’’
Ramifications of deal falling through
According to sources who spoke to the Wall Street Journal, the Macquarie Group Ltd. , an Australian bank looking to expand its commodities-trading division, among others has expressed interest in Morgan Stanley’s oil-trading and storage business.
MS had sought a buyer for the oil trading business due to pressure from U.S. regulators to divest physical commodities assets that might pose systemic risks to trading forms or the even the markets. Other banks, including J.P. Morgan Chase and Goldman Sachs, had got rid of some parts of their commodities-trading divisions.
Russian Rosneft developed into the lead bidder, and came to a final deal with Morgan Stanley in December 2013. The two companies then began to work on lining up the necessary regulatory approvals. They originally estimated the deal would close in the second half of 2014.
The plan had been to assuage federal regulators worries about the deal by running a separate sale process for its TransMontaigne unit, which owns oil-storage facilities and pipelines in the U.S. Morgan Stanley sold its stake in TransMontaigne to NGL Energy Partners LP. earlier this year.