J P Morgan to sell physical commodities business to Swiss trading house Mercuria for $3.5 bn

J P Morgan Chase & Co. yesterday said that it has reached a definitive agreement to sell its physical commodities business to Swiss trading house Mercuria Energy Group Limited, for $3.5 billion.

The all-cash transaction is expected to close in the third quarter of 2014, subject to regulatory approvals.

J P Morgan, the largest US bank by assets, had acquired the commodities business in 2010 from Royal Bank of Scotland for nearly $2 billion.

The New York-based lender had put its physical commodities division for sale last year, valuing the it at $3.3 billion, with an annual income of $750 million.

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

Following the sale, J P Morgan said that it would continue to provide traditional banking activities in the commodities markets, including financial products and the vaulting and trading of precious-metals businesses.

The firm will also continue to make markets, provide liquidity and risk management, and offer advice to global companies and institutions around the world.

''This transaction represents a major step in the development of Mercuria. The market professionals at J.P. Morgan commodities are amongst the most highly regarded in the industry. The opportunity to integrate them in Mercuria's global existing business will reinforce our Group's leading position in the energy and commodities markets'' said Marco Dunand, president and CEO of Mercuria.

Geneva-based Mercuria is a privately-held international commodity trading company focusing on global energy markets including crude oil and refined petroleum products, natural gas, power, coal, biodiesel, carbon emissions, base metals and agricultural products.

It is one of the world's five largest independent energy traders and asset operators and has annual revenues of around $98 billion.