Exclusive:JPMorgan in exclusive talks with Mercuria on commodities unit sale

Wed Feb 5, 2014 11:50am EST
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By Dmitry Zhdannikov

LONDON (Reuters) - Fast-growing trading house Mercuria, led by two former Goldman Sachs (GS.N: Quote) executives, has become the front-runner to buy the physical commodities unit of JPMorgan (JPM.N: Quote), one of the most powerful oil and metals desks on Wall Street, two sources told Reuters.

JPMorgan decided to sell its multi-billion dollar physical commodities division last year under rising regulatory and political pressure to retreat to the bank's core business of lending instead of speculating in raw materials.

"This week, JPM entered into exclusive talks with Mercuria," one of the sources familiar with the process told Reuters.

The final deal could take a few months to conclude, one of the sources said. If agreed, it would catapult Mercuria into the top tier of trading houses with Glencore Xstrata (GLEN.L: Quote), Vitol and Trafigura TRAFGF.UL.

In recent weeks, Mercuria was competing with Australian bank Macquarie Group (MQG.AX: Quote) and private equity manager Blackstone Group LP (BX.N: Quote) to buy JPMorgan's unit, sources had said.

Private and lightly regulated trading houses have benefited most from a major retreat by banks from commodities trading over the past two years.

Companies like Glencore and Russian oil major Rosneft (ROSN.MM: Quote) hired whole teams of traders from banks such as Morgan Stanley. (MS.N: Quote) But Mercuria could become the first trading house to absorb an entire physical division from a bank.

JPMorgan and Mercuria both declined to comment. A spokesman for Blackstone in London declined to comment. A spokesman for Macquarie in London did not immediately respond.   Continued...

A sign is seen on the Canary Wharf offices of JP Morgan in London September 19, 2013. REUTERS/Neil Hall