Morgan Gets Interest in Commodities Unit

Date : 06/06/2012 @ 8:50PM
Source : Dow Jones News
Stock : The Blackstone Grp. L.P. Common Units Representing Limited Partnership Interests (BX)
Quote : 30.97  -0.3 (-0.96%) @ 5:12PM

Morgan Gets Interest in Commodities Unit

Morgan Stanley (NYSE:MS)
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--Private-equity firms approached Morgan Stanley with interest in buying its commodities unit; firm has no plans to sell it, source says

--A person familiar with the situation says Blackstone has no interest in buying the unit or taking a minority stake in it

--Morgan Stanley was ranked fourth in market penetration for global over-the-counter energy derivatives in 2012, according to a survey

Morgan Stanley (MS) has been approached by several private-equity firms interested in acquiring its commodities business, but has no interest in selling either a minority stake or the unit itself, according to a person familiar with the situation.

Earlier Wednesday, CNBC reported that the securities firm is considering the sale of a minority stake in the unit and has spoken with potential suitors, including Blackstone Group L.P. (BX), citing people familiar with the matter.

Blackstone Group though, has no interest in buying or taking a minority stake in the business, according to another person familiar with the matter.

Morgan Stanley, along with rival Goldman Sachs Group (GS), has traditionally been one of the largest and most active banks in the commodity space, trading in everything from metals to grains, natural gas and crude oil. In addition to trading in futures and other derivatives, Morgan Stanley has also participated in the physical markets, buying and selling heating oil and other fuels.

The firm owns pipelines through its TransMontaigne Inc. subsidiary as well as electric-power generating facilities. At the end of 2011, the firm held $9.7 billion in physical commodity assets, up from $6.8 billion in 2010, according to its annual report.

Morgan Stanley was ranked fourth in market penetration for global over-the-counter energy derivatives in 2012, according to a survey by Greenwich Associates, coming in behind Barclays PLC (BCS), J.P. Morgan Chase & Co. (JPM) and Goldman Sachs.

The CNBC report cited new regulatory requirements--under the Dodd-Frank financial overhaul law--as a reason for a potential transaction. The Volcker Rule, a provision of the law which restricts banks' proprietary trading operations, could hurt the banks' ability to trade in commodities.

The transition of Morgan Stanley to a bank-holding company from an investment bank in 2008 has called into question some of its activities in the physical commodities markets. In the firm's annual report, filed with the Securities and Exchange Commission, the firm said it is still in discussions with the Federal Reserve to determine if all of its commodities activities are permitted.

Last week at an investor conference, an analyst asked Goldman Sachs President and Chief Operating Officer Gary Cohn if the firm could spin off its own commodities unit. Cohn acknowledged that such a move is theoretically possible but dismissed it as an idea, saying there are "enormous synergies" in having that business alongside its investment bank.

Shares of Morgan Stanley recently traded up 4.4% at $13.44. The stock has fallen 11% year-to-date.

--Anupreeta Das of The Wall Street Journal and Liz Moyer in New York contributed to this article.

Write to Brett Philbin at brett.philbin@dowjones.com




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