JPMorgan Set To Sell Physical Commodities Unit To Mercuria

By Mani
Updated on

JPMorgan Chase & Co. (NYSE:JPM) is said to be selling its physical commodities unit to Switzerland-based Mercuria Energy Group Ltd.

Citing people familiar with the developments, Andy Hoffman and Hugh Son of Bloomberg report that the deal could be announced as early as today.

JPMorgan efforts to sell non-core assets

As reported by ValueWalk earlier, last year JPMorgan Chase & Co. (NYSE:JPM) launched a firm-wide effort to sell off ‘non-core’ assets.

In July, the Federal Reserve indicated that it is reviewing its landmark 2003 ruling that allowed regulated banks to trade in physical commodities markets. The regulator’s move would affect the top global investment banks including JPMorgan Chase & Co. (NYSE:JPM),  Goldman Sachs Group Inc (NYSE:GS) and Morgan Stanley (NYSE:MS) as they derive substantial revenue from commodities trading.

Last month it was reported that JPMorgan Chase & Co. (NYSE:JPM) had moved a step closer towards selling its physical commodities business to Geneva-based trading house Mercuria Energy Group, in preference to Sydney-based Macquarie Group and New York-based private equity firm The Blackstone Group L.P. (NYSE:BX).

JPMorgan assets valued at $3.3 billion

In its offer document circulated last year, JPMorgan Chase & Co. (NYSE:JPM) valued its physical commodities business at $3.3 billion. Its crude trading operations has the largest part that the bank values at $1.7 billion, while its North American natural gas assets are valued at $800 million. The bank’s base metals, including the Henry Bath warehouse company, are valued at $500 million.

According to Andy Hoffman and Hugh Son of Bloomberg Mercuria may pay as much as $3.7 billion for the unit.

Mercuria was started in 2004 by former Goldman Sachs Group Inc (NYSE:GS) traders Marco Dunand and Daniel Jaeggi and is now the world’s fourth-largest independent commodity trader.

Interestingly, Morgan Stanley(NYSE:MS) too took a step in distancing itself from commodities operations by announcing the sale of its Global Oil Merchanting unit. In December, the company signed a deal with Russia-based Rosneft Oil Company’s wholly owned subsidiary to vend the unit.

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