JPMorgan sells physical commodities unit to Mercuria for $3.5 billion

Wed Mar 19, 2014 6:18pm EDT
 
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By Dmitry Zhdannikov and Chris Peters

NEW YORK (Reuters) - JPMorgan (JPM.N: Quote) is selling its physical commodities business to Mercuria for $3.5 billion, the U.S. bank said on Wednesday, sweeping the fast-growing Swiss trading house into the top league of commodities traders.

The all-cash transaction for one of the most powerful oil and metals desks on Wall Street is expected to close in the third quarter, JPMorgan said in a statement.

In documents circulated to potential buyers last year, JPMorgan had valued its physical commodity business at $3.3 billion, with an annual income of $750 million. JPMorgan paid nearly $2 billion to buy the largest part of the business from RBS in 2010.

JPMorgan decided to sell its multibillion-dollar physical commodities division last year because of rising regulatory and political pressure, and so it could concentrate on the bank's core business of lending.

"Our goal from the outset was to find a buyer that was interested in preserving the value of JPMorgan's physical business," said Blythe Masters, head of JPMorgan's global commodities business.

JPMorgan said it would still provide traditional banking activities in commodities markets, including financial products and the vaulting and trading of precious metals.

It gave no further details of what exactly would be included in the transaction, but a source close to the matter said the bank's metal brokerage business including its London Metal Exchange (LME) ring dealing team would remain with JPMorgan.

However its Henry Bath metals warehousing unit was included in the deal, the source added.   Continued...

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