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Barclays, Moving on Up, Picks Up UBS Book

Barclays Capital, the investment banking division of Barclays PLC, made it official Friday, announcing it was taking over the UBS book for its base metals, oil and U.S. natural gas and power trading, adding it to its Lehman Brothers Inc. holdings, which it picked up last September. The two acquisitions could put Barclays in the top 10 North American natural gas marketers in NGI's ranking.

According to NGI's second quarter sales volume rankings of North American Natural Gas Marketers, Lehman Brothers was 9th with 5.83 Bcf/d of gas sold and and UBS was 12th with 3 Bcf/d. Combining those totals would put Barclays in sixth place with 8.83 Bcf/d, just ahead of Chevron. (see http://intelligencepress.com/features/rankings/gas/gas_marketer_rankings_2008q2.html). That total is a rough estimate because the UBS deal did not include that company's Canadian operations, which were split off and picked up by J.P. Morgan. Both Lehman and UBS dropped out of the 3Q marketer survey because of their business status.

Terms of the deal with UBS, a subsidiary of Switzerland-based UBS AG, were not disclosed. That the transaction was in the works surfaced at the end of December when the companies asked for and received a temporary waiver of the Federal Energy Regulatory Commission's capacity-release rules, so they would not inadvertently violate the rules while completing the hasty transaction (see NGI, Jan.5).

Barclays said it will work with UBS to transition the market positions and clients. At this point the deal does not involve personnel. Decisions on staffing will be made later. In North America Barclays has offices in New York, Houston, Portland, OR, and Calgary. "We've been growing this business for several years and we are going to keep growing," a spokesman said.

"Barclays Capital is pleased to be receiving this portfolio of business," said Joe Gold, co-head of commodities for Barclays Capital. "As a leader in commodities, we have the reach and expertise necessary to execute a transaction of this nature." Barclays Capital is currently one of the top three financial institutions in commodities, providing a full range of services for more than 1,100 clients globally.

With the sale of its trading assets to Barclays, UBS will effectively exit its commodities business in the United States, excluding precious metals. Barclays will be acquiring all of UBS' energy and natural gas agreements, including gas purchase and sale agreements, as well as natural gas transportation and storage agreements.

UBS has said it is unloading its commodities business in response to the downturn in financial markets during the past couple of months (see NGI, Oct. 6, 2008). It took over the bankrupt Enron's trading operation in 2002 (see NGI, Feb. 11, 2002).

Barclays' purchase of Lehman Brothers Inc., a subsidiary of bankrupt Lehman Brothers Holdings Inc., for $1.75 billion included the investment banking and trading businesses as well as Lehman's New York headquarters building, but it did not include Lehman's Eagle Energy Partners unit.

In 2005 Barclays purchased the trading book of Duke Energy North America (see NGI, Nov. 21, 2005).

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