JPMorgan Decides to Sell $2 Billion Commodities
JP Morgan Chase & Co. (JPM) is an American multi-national banking and financial services holding company. It is the largest bank in the U.S. and has total assets worth approximately US$2.509 trillion. It has been in news recently for having received bids worth $2 billion for its commodities from giants like Macquire Group, Mercuria Energy Group Ltd., and Blackstone Group LP (BX), as per the sources with accurate and reliable knowledge of the matter.
As per reports released on the 29th of January, 2014, JP Morgan is in the process to ask the suitors for some more details on their respective offers in order to narrow down the list to one particular and exclusive bidder, following which the company would choose a winner. As per the sources – who have preferred to remain unnamed owing to the confidentiality of the project – the process is like to happen in the current week. However, it could extend into February in case if the offers demand more details and information.
The massive step to sell away the business was taken up by this biggest U.S. bank by assets because the regulators reviewed a decade-old ruling that allowed deposit-taking banks to continue trade of physical commodities. As per the company reports and statistics, the bank unit produces $750 million in yearly income before compensation costs, but the bank has said that the sale of physical commodities business that is scheduled to take place doesn’t involve gold bullion storage or derivatives.
According to one spokesperson, the bank unit that had $3.3 billion in physical commodity assets is watched over by the giant bank’s commodities chief Blythe Masters. Mr. Masters, 44, may after the sale join the acquirer and run the many operations of the firm that wins the auction. However, as of now, the representatives and spokespersons of the potential bidders have refused to comment on the matter.
Macquire Group is a company that has existing trading business in power and coal, and oil and gas. It has been expanding its current business from the past few years, and had bought a stake in British metals-warehousing company Scale distribution last year. According to its website, it is the fourth-largest natural gas trader in North America. This company competed with JP Morgan Chase & Co. for the sale of assets from RBS Sempra Commodities, which is a venture between the Sempra Energy and the RBS Group in the year 2010.
Mercuria Energy Group Ltd. Is a company that has been gaining oil infrastructure assets in North America and a worldwide chain of warehouses for its metals trading business. Mercuria is registered in Cyprus, headquartered in Geneva, and is currently the fourth-largest independent commodities trader.
Bloackstone Group LP is the world’s largest private-equity firm and wants to acquire JP’s commodities as it sees this deal as another way to expand and diversify its business. This giant firm has grown fee-paying assets and has tapped tons of revenue that are less dependent on the constantly changing market cycles that drive private-equity profits.