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Final bids for JPMorgan physical business due

Jan 21, 2014 | 04:45 PM |

Tags  JPMorgan Chase, commodities trading, aluminum, BlackRock, Macquarie, Mercuria, Andrea Hotter

NEW YORK — Short-listed bidders in the sale of JPMorgan Chase & Co.’s physical commodities business are expected to submit their final bids this week, with a decision likely soon thereafter, sources familiar with the matter told AMM.

U.S. private equity group Blackstone Group LP, Australia’s Macquarie Bank and Swiss-based energy and commodities trading company Mercuria Energy Group Ltd. are soon due to provide the U.S. investment bank with their final and best bids for the physical commodities business.

A frontrunner is then expected to emerge, with a deal to follow imminently, sources familiar with the matter said.

New York-based JPMorgan declined to comment.

The bank, a Category I ring-dealing member of the London Metal Exchange, would prefer to keep the physical commodities business intact in order to maximize its value and minimize job losses.

The three bidders—a private equity firm, a non-U.S. bank and a commodities trading company—are perhaps textbook options as finalists.

Blackstone isn’t active in physical commodities and, therefore, would be more likely to take the whole JPMorgan physical business and run it as a unit.

Meanwhile, Macquarie has for some time looked to be more active in physical commodities, including metals warehousing.

The Australian bank has a stake in U.K. warehouse company Scale Distribution Ltd., which runs an LME-approved warehouse in Liverpool, England.

The bank is active in physical base metals, including aluminum, copper and zinc, but the overlap between its relatively small business and that of JPMorgan’s is likely to be minimal.

Similarly, Mercuria has been building the metals side of its business. It doesn’t own LME-approved warehouses and has been looking to grow further.

JPMorgan said in July that following an internal review of the businesses, including its Henry Bath LLC metals warehousing operations, it planned to "explore a number of options" related to its physical commodities division (, July 26).

It also said in July that it was "fully committed" to its traditional commodities banking activities and has no plans to divest its metals futures brokerage business.

JPMorgan’s exit from physical commodities comes amid continued debate among U.S. politicians and regulators over the role of banks in the sector.

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