Mercuria Energy Group Ltd., which agreed to buy JPMorgan Chase & Co.’s physical commodity unit for $3.5 billion in March, is offering jobs to about 200 people, or half the unit’s staff, according to a person familiar with the matter.
Mercuria, whose main trading floor is in Geneva, began making offers to traders and executives in the JPMorgan commodities unit late last week, said the person, who asked not to be identified because the process is private. Those who aren’t offered jobs will either stay with JPMorgan or be fired, the person said.
Investment banks including JPMorgan, Barclays Plc and Morgan Stanley are withdrawing from or scaling back physical commodity operations as revenue falls and regulators place increased scrutiny on lenders owning and storing raw materials. Trading houses such as Mercuria, which has in less than a decade grown to become the world’s fourth-largest independent commodity trader with 2013 revenue of $112 billion, are filling the void.
JPMorgan spokesman Patrick Burton declined to comment as did Mercuria spokesman Benoit Lioud.
Mercuria is most interested in JPMorgan’s physical gas and power traders in Europe and the U.S. as well as gas and crude trading operations in Canada, the person said.
Blythe Masters, the head of the bank’s global commodities operations, will leave once the sale is completed, JPMorgan has said.
Mercuria hasn’t decided how many of the more than 100 employees at JPMorgan’s Henry Bath & Sons Ltd. metals warehousing unit will be asked to join the new company, the person said. The 220-year-old Liverpool-based firm handles and stores aluminum, copper and other metals and was a founding member of the London Metal Exchange.
From 2011 to 2013, Mercuria hired 570 people, including executives from banks such as Goldman Sachs Group Inc. and Barclays. That boosted staff to 1,200 from about 10 in 2004.
The JPMorgan unit will give Mercuria gas and power trading operations on both sides of the Atlantic, physical assets spanning 40 locations in North America, an oil-trading book with a supply and off-take contract at the largest refinery on the U.S. East Coast, and 6 million barrels of storage leases in the Canadian oil sands.
Mercuria’s head of compliance Victoria Attwood Scott said last month that the trading house is in discussions with Britain’s Financial Conduct Authority to determine whether the purchase of JPMorgan’s European gas and power business means Mercuria should be subject to regulatory oversight. Unlike banks, the FCA does not have regulatory authority over trading houses.
Revenue for the 10 largest investment-bank commodity operations slumped to $4.5 billion last year from about $14 billion in 2008, according to the London-based analytics company Coalition.
Barclays said last week that it’s exiting most commodities markets apart from precious metals, oil and gas derivatives and index products. Barclays cut jobs in January in fixed income, currencies and commodities and shut power-trading desks in the U.S. and Europe in February.
Deutsche Bank AG, Germany’s largest bank, said in December it would get out of dedicated energy, agriculture, dry-bulk and industrial-metals trading, cutting about 200 jobs. Bank of America Corp. said in January it would dispose of its European power and gas inventory as increasing regulation curbs trading.
Morgan Stanley agreed to sell its oil-merchant business to OAO Rosneft, Russia’s state-run producer, in December. The sale hasn’t been submitted for regulatory approval and the companies will probably wait until tensions cool after the U.S. sanctioned Rosneft Chief Executive Officer Igor Sechin, a person with knowledge of the situation said on April 29.