London 14/09/2015 - (Updating with comment on deal not yet going through, background on sale)
Mercuria Energy Resources has agreed in principle to sell 51 percent of warehouse company Henry Bath & Son Ltd to CMST Development (CMSTD), a Chinese logistics provider better known as Zhongchu, FastMarkets understands.
CMSTD announced the agreement in principle on the Shanghai Stock Exchange earlier on Monday but the deal is subject to certain requirements as well as regulatory approvals, a well-informed source said.
"The intention is to complete the transaction over the next six weeks - the transfer has not yet taken place and Zhongchu doesn't yet own 51 percent of Henry Bath," the source said.
Zhongchu will pay an estimated $60 million for the 51-percent stake if the deal is approved, it said in the notice.
Mercuria declined to comment.
The merger with Henry Bath will facilitate its plan to expand beyond its existing warehousing and logistics business in China and into Asia, Europe and America.
Henry Bath & Sons Ltd operates LME-listed warehouses around the world and also has non-LME warehouses in the Shanghai bonded zone. Zhongchu has many logistics distribution centres and business and trade institutions across China.
The process to sell a large part of Henry Bath started back in early July just nine months after Swiss-based Mercuria bought it from JP Morgan, FastMarkets reported at the time.
Mercuria Energy bought Henry Bath in October 2014 as part of a deal to acquire JP Morgan's physical commodities business for $800 million. The price tag had initially been much higher at $3.5 billion but was then dramatically scaled back after certain supply agreements and inventory positions were taken off the table.
In October 2014, in an interview with the Financial Times, Mercuria CEO Marco Dunand said he had been approached by several parties looking to invest in Henry Bath and was "open to the idea of having an investor taking a substantial stake".
Mercuria had always favoured the route of selling a large stakeholding rather than a full divestment of Henry Bath, FastMarkets understands.
The price tag on Henry Bath is thought to have been as high as $200 million before new LME rule change proposals were announced in early July, further reducing the attractiveness of the LME warehousing business.
Henry Bath started to downsize its LME warehousing business this year by delisting some sheds and handing over the large fruit terminal in Rotterdam to Pacorini Metals back in January.
(Additional reporting by Perrine Faye, editing by Mark Shaw)