J.P. Morgan Kicks Off Sale of Commodities Business – by Christian Berthlsen (Wall Street Journal – October 9, 2013)


Bank’s Offering Documents Value Assets at $3.3 Billion

J.P. Morgan Chase JPM +2.33% & Co. has begun circulating offering documents for its physical commodities business, valuing the assets at $3.3 billion and telling prospective buyers they generate $750 million in annual income before compensation costs, according to people familiar with the matter.

The New York company, which announced in July that it would exit the physical commodity business as regulators are increasing their scrutiny of bank roles in the industry, began circulating the offering documents to prospective buyers in recent weeks and expects offers to come in the week of Oct. 21, according to people who have reviewed the materials.

The bank is soliciting offers for the group as a whole entity—which it refers to as “Newco”—or for individual divisions within the group, which are broken down into global crude, North American power, North American natural gas, European power and gas, base metals, coal and the Henry Bath metals warehousing network.

A J.P. Morgan spokesman declined to comment.

The largest valuation in the package is the crude business, with $1.7 billion in assets, followed by North American natural gas at $800 million and base metals at $500 million. The bulk of the high valuation in those groups likely represents trading inventories, rather than hard assets such as storage facilities. Still, the crude group includes substantial storage facilities in Canada, while the natural-gas group includes gas fields and storage caverns.

Other assets included in the valuations may be for financial agreements such as capital provided to refining facilities.

The $750 million income figure for the group reflects earnings before the cost of compensating staff who run it. Banks usually spend about 50% of revenue on compensation.

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