JPMorgan Chase & Co. (NYSE:JPM) Sold Its Physical Commodities Business

by Paul Wilson | Monday, Mar 24, 2014 | 3977 views

Northern, WI 03/24/2014 (usastockreport) – JPMorgan Chase & Co. (NYSE:JPM)  today announced that it has reached an arrangement with Mercuria Energy Group Ltd. a Swiss privately held international commodity trading company to sell its physical commodities business for $3.5 billion. The talks which started in February will be supposed to be close by the end of the third quarter of 2014. The all cash transaction will happen, subjected to regulatory approvals by both parties.

At the end of the transaction J.P. Morgan and Mercuria will work closely to ensure easy transfer of commodities assets, deals, physical trading operations and employees to Mercuria.

Blythe Masters, head of J.P. Morgan’s global commodities business said from the start their goal was to find a buyer who must be able and competent enough to preserve the value of J.P. Morgan’s physical business.

Inching Towards Dream:

With this deal, the Mercuria has come closer to attend the status for which it was established by two former Wall Street traders. At one time pair used to be known as Bambi and Godzilla. Right now in the world, they are among first four prime independent commodity traders. Since its inception the company has created a fleet of energy traders around the world. It has 1000 employees more than 1000 people in 28 countries as per its website information.

Reasons to Sell:

Last year in its own internal review JPMorgan Chase & Co. (NYSE:JPM) concluded that the gains from commodities weren’t lucrative enough for the company to take capital or regulatory risk.  It was also done due to surmounting regulatory and political pressure. Now it wants to concentrate on the core business of lending which is company main strength.

What Lies Ahead

After the sale JPMorgan will continue providing core banking activities in commodities area which includes vaulting and trading of precious metals and financial products. This is the area in which the JPMorgan is leader from the years. There won’t be any material impact by the transaction on JPMorgan Chase & Co. (NYSE:JPM) earnings.

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