It looks like Morgan Stanley has finally lined up a buyer for its oil trading unit. The investment bank had preliminary deals with foreign buyers in place twice in the past, but both deals fell through.
According to sources who spoke to the Wall Street Journal, the latest offer comes from Castleton Commodities International, a trading firm with investors including hedge fund titans Paul Tudor Jones and Glenn Dubin.
Neither Castleton nor Morgan Stanley would comment on this story for the record.
After 13 years at the head of KG Funds, the firm's founder, Ike Kier, has decided to step down and return outside capital to investors. The firm manages around $613 million of assets across its funds and client accounts. According to a copy of the firm's latest investor update, Kier has decided to step down Read More
Past efforts by Morgan Stanley to sell oil trading division
Of note, Morgan Stanley had reached a deal last year to sell its oil business to Russian state-owned oil firm Rosneft, but the deal expired as it awaited regulatory approval that was not forthcoming given Russia’s invasion of Ukraine.
Back in 2012. MS undertook extended negotiations to try and sell a large stake in its commodities arm to Qatar’s sovereign wealth fund, but nothing was ever finalized.
Investment banks selling commodity operations
The WSJ article notes that large investment banks are selling their physical-commodity divisions given the big drop off in raw-materials prices and increasing regulatory pressures. Furthermore, the Fed has explicitly noted that that big IBs producing and transporting commodities can create a systemic risk to the financial system.
Private commodity-trading firms that operate across borders and face less regulatory scrutiny and fewer disclosure requirements are taking over the sector. Morgan Stanley selling its oil unit to Castleton fits right in with this trend.
By the same token, Morgan Stanley CEO James Gorman has told insiders selling the oil business remains a priority for 2015.
More on Castleton Commodities
Castleton Commodities is based in Stamford, Connecticut. The firm emerged out of a spinoff of Louis Dreyfus Commodities Group’s energy-trading operations a couple of years back. The trading company has recently expanded beyond North American natural gas markets into other commodities such as seaborne petroleum and iron ore. Castleton also participated in the auction of JPMorgan’s physical commodities business last year, which was finally bought by Swiss-based Mercuria.