London 19/03/2014 - JP Morgan Chase & Co has reached a definitive agreement to sell its physical commodities business to Mercuria Energy Group Ltd for $3.5 billion, it said.
The all-cash transaction is expected to close in the third quarter of 2014 subject to regulatory approvals, the US bank said in a release on Wednesday.
JP Morgan will work closely with Mercuria to ensure a smooth transition of commodities assets, transactions, physical trading operations and employees to Mercuria at the close of the transaction, it added.
Swiss trader Mercuria had entered into exclusive negotiations with JP Morgan on February 5 after several other bids were discarded, FastMarkets reported at the time.
JP Morgan is selling its physical metal trading team, together with its Chinese onshore metal business and warehouse company Henry Bath & Sons Ltd. It is also selling its physical energy operations that it inherited from its 2010 purchase of RBS Sempra Commodities.
But the US bank is not selling its metal futures business, which includes a ring-dealing membership of the London Metal Exchange (LME).
Following the sale, JP Morgan will continue to provide traditional banking activities in the commodities markets, including financial products and the vaulting and trading of precious metals, the company said in Wednesday's statement.
More than 50 potential suitors initially approached the bank; however, the finalists were believed to have been US investment firm KKR (Kohlberg Kravis Roberts), Australian bank Macquarie, Brazilian bank BTG Pactual and private equity manager Blackstone Group LP alongside Mercuria.
In July 2013, JP Morgan said that it would pursue strategic alternatives for its commodities business, including its physical metal trading and warehousing operations - options would include a sale, spin-off or partnership.
(Editing by Mark Shaw)