The reshuffling of the North American energy trading sector continued on Monday as J.P. Morgan announced that it will acquire UBS Commodities Canada Ltd., the Canadian energy operations of UBS AG, as well as the firm’s global agricultural business. Financial details of the acquisition, which is expected to close during the first quarter of 2009, were not disclosed.
The sale by UBS was not unexpected as the company announced in October that it was exiting commodities trading — with the exception of precious metals — in its Fixed Income business as part of the bank’s restructuring (see Daily GPI, Oct. 6). UBS Energy, which marketed 3 Bcf/d of natural gas during 2Q2008, did not participate in NGI‘s Top North American Gas Marketers ranking for 3Q2008 (see Daily GPI, Dec. 22). J.P Morgan does not currently participate in the rankings either.
With operations and employees based in Calgary, UBS Commodities Canada will become an indirect wholly owned subsidiary of J.P. Morgan. J.P. Morgan said the deal will immediately expand its presence in the Canadian natural gas, power and crude oil physical and financial markets, while further expanding the investment bank’s overall Canadian client franchise. J.P. Morgan’s Calgary office will be run by Brian Cumming, a managing director with extensive experience in the commodity markets. Cumming was most recently based in J.P. Morgan’s London office. UBS put significant focus on its energy trading business in early 2002 when it acquired Enron Corp.’s trading arm through a deal with the U.S. Bankruptcy Court in New York (see Daily GPI, Feb. 11, 2002). Under the deal, which reportedly included nearly 650 former Enron employees, UBS did not pay anything up front or assume any of the trader’s debt (see Daily GPI, Feb. 8, 2002).
J.P. Morgan will also acquire UBS’ global agricultural business, which includes a London-based trading and marketing team. J.P. Morgan said the addition of UBS’ business will expand its client franchise and risk management capabilities across agricultural products.
“We continue to take advantage of opportunities that will further enhance and diversify our global commodities business,” said Blythe Masters, head of Global Commodities at J.P. Morgan. “The addition of these businesses and talented teams further expands our North American energy franchise and provides further depth to our growing agricultural and soft commodities platform.”
J.P. Morgan said its Global Commodities division has grown significantly over the past two years, both organically and through acquisitions. During that time the company has hired more than 100 trading, sales and marketing professionals.
Earlier this year J.P. Morgan acquired two key commodity franchises, ClimateCare and Bear Energy. ClimateCare is a carbon-offset company that originates and trades carbon emission reduction offsets in both the compliance and voluntary markets. Bear Energy was a large physical and financial U.S. power and gas franchise based in Houston that J.P. Morgan obtained as part of the larger Bear Stearns acquisition (see Daily GPI, March 18).
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