JP Morgan Sells Commodity Trading Arm to Mercuria

JPMorgan Chase & Co has completed the sale of its physical commodities unit to Mercuria, the fast-growing Swiss trading house said on Friday as it expands into metals and North American markets to enter the top league of commodities traders.

The deal, announced last March, was originally valued at $3.5 billion but the price decreased to around $800 million because Mercuria bought less metals and oil in JPMorgan's storage, sources close to the deal said.

JPMorgan decided to sell its multibillion-dollar physical commodities division last year because of rising regulatory and political pressure, and so it could concentrate on the bank's core business of lending.

"When we founded Mercuria 10 years ago, it was our goal to develop a global energy-focused commodities group," said Marco Dunand, chief executive of Mercuria.

"This acquisition helps to bring that vision to reality by building upon our physical power, gas and oil operations in North America and by adding to our client base," he added.

Private trading houses have benefited most from a major retreat by banks from commodities trading over the past two years.

Mercuria had a 2013 turnover of $112 billion and is primarily focused on energy, with over 1,000 people operating from offices worldwide.

JPMorgan employees transferring to Mercuria will primarily join Mercuria's trading hubs of Houston, London, Calgary, Greenwich (Connecticut) and Singapore.

As part of the deal, Mercuria will acquire Henry Bath, the historic metals warehousing, storage, and handling business. Mercuria will operate Henry Bath as a stand-alone subsidiary independent from its trading operations, it said.

JPMorgan paid nearly $2 billion to buy the largest part of the commodities business from RBS in 2010.

(Reporting by Dmitry Zhdannikov; Editing by Vincent Baby)