Goldman Sells Metals Unit to Billionaire Reubens After ProbeZeke Faux
Goldman Sachs Group Inc. sold a metal-warehouse unit it acquired in 2010 to Reuben Brothers after the business attracted congressional scrutiny.
Terms weren’t disclosed in a statement today from the New York-based bank announcing the deal. Goldman Sachs bought the business, Metro International Trade Services LLC, for $451 million, documents released last month by the U.S. Senate Permanent Subcommittee on Investigations show.
Banks are reducing their investments in physical commodities amid investigations by Congress and regulators into whether involvement in the markets poses a risk to the financial system. The Senate panel’s report last month alleged that Goldman Sachs moved aluminum from warehouse to warehouse to influence how much customers paid for storage and financial products tied to the metal.
Jacques Gabillon, head of Goldman Sachs’s global commodities principal investments group, said at a Senate hearing at the time that the firm had received interest in Metro from potential buyers in Europe, Russia and China. He disputed the senators’ claims of market manipulation.
The Federal Reserve has been examining whether it’s appropriate for financial companies to own commodities and trade derivatives linked to them at the same time.
JPMorgan Chase & Co. sold some commodities businesses to Mercuria Energy Group Ltd., a trading firm. Morgan Stanley’s deal to sell its oil-merchanting business to OAO Rosneft failed to win regulatory approval, the state-controlled Russian oil producer said today on its website.
The billionaire Reuben brothers, Simon and David, have amassed a fortune investing in property and Russia’s aluminum industry. They won approval last year to develop what’s likely to be the U.K.’s most expensive home near London’s Ritz Hotel.
Aluminum users such as beer brewer MillerCoors LLC last year complained that warehouse operators authorized by the London Metal Exchange were inflating costs by constraining supply. Goldman Sachs’s Metro unit paid “millions of dollars in incentives” for firms to move metal between its sheds, leading to longer queues for other users waiting to remove metal and boosting rental fees, according to the Senate report.
Goldman Sachs said in response to the report that there has not been a shortage of aluminum and the metal’s price has dropped since 2008.
“Metro’s incentive payments did not lengthen queues, restrict the availability of metal or impact prices paid by consumers or other end-users of aluminum,” the bank said in a statement at the time.