JPMorgan Chase & Co. (JPM) To Sell Its Commodities Unit To Mercuria

JPMorgan Chase & Co. (NYSE:JPM) will sell its physical commodities unit to Mercuria, says a report from Reuters. The Swiss trade house is considered as one of the best commodities traders. According to the statement from the New York-based bank, Mercuria will pay $3.5 billion in cash.

Blythe Masters, head of the company’s global commodities business said “Our goal from the outset was to find a buyer that was interested in preserving the value of JPMorgan’s physical business,” and added “Mercuria is a global leader in the commodities markets and an excellent long-term home for these businesses.”

JPMorgan has been looking for a buyer

The Wall Street Journal reported that the U.S. investment bank opened the account books for inspection by the potential buyers in October, and at that time value of the unit was $3.3 billion. JPMorgan Chase & Co. (NYSE:JPM) agreed to sell its multi-billion dollar physical commodities, last year, owing to increasing regulatory and political pressure. The sale will help the U.S. bank to focus on its core business of lending.

According to the sources, JPMorgan Chase & Co. (NYSE:JPM) entered into confidential talks with Mercuria, in February. Apart from Mercuria other interested buyers included names like Australian bank Macquarie Group and private equity manager Blackstone Group LP.

Trading houses taking over commodities trading from banks

Over the last two years, trading houses have benefited the most from retreat of banks from the commodities trading. Trading houses are private and do not have to deal with heavy regulations. Previously, companies including Glencore and Russian oil major Rosneft hired full teams from the bank such as Morgan Stanley, but Mercuria, if the sale goes through, will be the first trading house to acquire the full division from the bank.

Earlier, in February, Mercuria became the front-runner to buy the physical commodities unit, which is one of the most powerful oil and metals desks on Wall Street, according to Reuters.

Mercuria, which was founded in 2004 by two Goldman Sachs traders, is now the fourth biggest independent commodity trader globally. The Geneva-based company has grown rapidly in past three years. The company had only 10 employees in 2004 compared to 1200 in 2013.