JPMorgan Said Near Decision on $2 Billion Commodities Unit Sale
JPMorgan Chase & Co. (JPM) could fetch at least $2 billion for its commodities unit after it received bids from Blackstone Group LP (BX), Macquarie Group and Mercuria Energy Group Ltd., people with knowledge of the matter said.
JPMorgan will ask those suitors for more details on their offers to narrow the list to one exclusive bidder and may choose a winner as soon as this week, said the people, who asked not to be named because the information is private. The process could extend into February, one of the people said.
The biggest U.S. bank by assets decided to sell the business as regulators review a decade-old ruling allowing deposit-taking banks to trade physical commodities. The unit produces $750 million in annual income before compensation costs, people with knowledge of the matter have said. The sale of the physical commodities business doesn’t include derivatives or gold bullion storage, the bank has said.
The unit, which had $3.3 billion in physical commodity assets according to one person, is overseen by JPMorgan’s commodities chief Blythe Masters. Masters, 44, may join the acquirer to run the operations, depending on which firm wins the auction, said one of the people.
A representative for New York-based JPMorgan declined to comment, as did spokesmen for New York-based Blackstone, Geneva-based Mercuria and Sydney-based Macquarie.
Blackstone, the world’s largest private-equity firm, sees commodities as another way to diversify its lines of business, one person said. The firm has grown fee-paying assets and tapped streams of revenue that are less dependent on the market cycles that drive private-equity profits.
Mercuria would gain oil infrastructure assets in North America and a global chain of warehouses for its metals trading business. Registered in Cyprus with headquarters and major trading operations in Geneva, Mercuria is the fourth-largest independent commodities trader. The company posted a profit of $343 million in 2012 on revenue of $98 billion.
Macquarie, which has an existing trading business in oil and gas, power and coal, has been expanding that business in the past years, buying a stake in British metals-warehousing company Scale Distribution last year. It is the fourth-largest trader in natural gas in North America, according to its website. Macquarie competed with JPMorgan for assets from RBS Sempra Commodities, a venture between Royal Bank of Scotland Group Plc and Sempra Energy, in 2010.
While JPMorgan’s commodities unit also drew interest from Grupo BTG Pactual, the Brazilian investment bank, the bank ended its pursuit, people said this month.
KKR, which teamed up with U.S.-based energy trader Castleton Commodities International LLC, is no longer involved in the process, according to a person familiar with the situation. A spokeswoman at KKR declined to comment on its interest, while a representative for Castleton didn’t respond to a request for comment via e-mail.
To contact the reporters on this story: Jodi Xu in New York at firstname.lastname@example.org; Hugh Son in New York at email@example.com; Andy Hoffman in Geneva at firstname.lastname@example.org; Devin Banerjee in New York at email@example.com