LONDON - Mercuria, the fast-growing energy and commodities trading company, has entered into exclusive talks to purchase JPMorgan Chase’s physical commodities business, according to a person familiar with the discussions.
JPMorgan announced in July that it was exploring strategic alternatives, including a possible sale or spin-off, for its physical commodities business, which ranges from metals to oil. The business holdings include trading desks and warehouses to hold metals.
The parties hope to finalize a deal in the coming weeks, according to the person, who was not authorized to discuss the talks publicly.
JPMorgan and Mercuria declined to comment Thursday.
The negotiations come as traditional financial service companies are facing increased scrutiny over their roles in the physical commodities market, and several financial companies have announced their intention to exit the business.
Deutsche Bank, Morgan Stanley and Bank of America Merrill Lynch have all sold or closed parts of their commodities operations in recent months.
The Federal Reserve, which enacted an exemption several years ago that allows investment banks to own pipelines and other storage facilities for oil and other commodities, is considering restrictions on the activities of financial holding companies in the physical commodities markets.
The Volcker Rule, which was recently finalized by regulators, restricts the ability of banks to trade for their own accounts, and is also expected to limit the ability of financial companies to participate in some activities in the commodities markets.
Last year, the Commodity Futures Trading Commission subpoenaed Goldman Sachs and other owners of metals warehouses as part of an inquiry into potential irregularities in the aluminum market. Goldman Sachs has explored the sale of Metro International Trade Services, its metals warehousing business.
Mercuria, a privately held Swiss company, was founded in 2004 by two former Goldman Sachs traders, Marco Dunand and Daniel Jaeggi, with a focus on oil. The company has quickly expanded in a short period to become a player in energy, metals and other commodities. It has offices in 28 countries and employs more than 1,000 people.
Mercuria is an attractive option because it would likely buy the business as a whole and allow the existing employees to transfer, a person familiar with the discussions said.
Following any sale or spin-off, JPMorgan has said it will continue to conduct traditional banking activities in the commodities markets, including trading precious metals and making markets in commodities.
