REUTERS - Morgan Stanley (NYS:MS - News) is in advanced talks over selling a stake in its multibillion-dollar commodities trading division to Qatar's sovereign wealth fund, CNBC reported on Friday, citing people familiar with the matter.
Talks have recently focused on the Qatar Investment Authority buying a minority stake, according to one of the people, CNBC reported on its website. It said a deal might be imminent, but cautioned the exact terms could not be determined and that discussions could still fall apart.
A Morgan Stanley spokeswoman declined to comment.
Morgan Stanley, whose commodity unit was one of the original "Wall Street refiners" that pioneered the energy derivatives market two decades ago, was first reported to be considering selling a stake a month ago.
Earlier it was believed to be in talks with private equity funds, including Blackstone Group LP (BX.N).QIA, which controls an investment fund of over $100 billion, has emerged as a leading investor in the raw materials sector.
It has deals ranging from a major stake in London-listed miner Xstrata Plc (LSE:XTA.L - News) - the subject of a bid from Glencore International Plc (GLEN.N), which competes with Morgan Stanley - to a small private equity vehicle together with British bank Barclays Plc (LSE:BARC.L - News).
The commodities unit at Morgan has earned the bank an estimated $17 billion in revenue over the past decade, trading both financial contracts and physical commodities such as gasoline and diesel fuel.
CNBC said owning part of the unit could "cost the Qatari fund a billion dollars or more," without providing a source for the sum.
But with a deepening role in illiquid cash markets and physical assets through subsidiaries TransMontaigne Inc and Heidmar Inc, Morgan's division has also become a weight on the bank's capital base as it faces credit pressures.
And new regulations threaten to limit its advantage in trading physical commodities, long its strong suit.
Speaking earlier this week on CNBC, Morgan's chief financial officer, Ruth Porat, said they "look at commodities as an ongoing" business, but could "never say never" about outside investment.
Enlisting a cash-rich investor to help buoy a commodity trading division would be unusual on Wall Street, although there is some precedent for joint ventures.
Louis Dreyfus Highbridge, an energy merchant owned by the French commodity trader and a JP Morgan investment group, has existed for years.
More recently a handful of Sempra Commodities veterans secured the backing of a private equity fund in order to launch a new venture called Freepoint Commodities.
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Talks have recently focused on the Qatar Investment Authority buying a minority stake, according to one of the people, CNBC reported on its website. It said a deal might be imminent, but cautioned the exact terms could not be determined and that discussions could still fall apart.
A Morgan Stanley spokeswoman declined to comment.
Morgan Stanley, whose commodity unit was one of the original "Wall Street refiners" that pioneered the energy derivatives market two decades ago, was first reported to be considering selling a stake a month ago.
Earlier it was believed to be in talks with private equity funds, including Blackstone Group LP (BX.N).QIA, which controls an investment fund of over $100 billion, has emerged as a leading investor in the raw materials sector.
It has deals ranging from a major stake in London-listed miner Xstrata Plc (LSE:XTA.L - News) - the subject of a bid from Glencore International Plc (GLEN.N), which competes with Morgan Stanley - to a small private equity vehicle together with British bank Barclays Plc (LSE:BARC.L - News).
The commodities unit at Morgan has earned the bank an estimated $17 billion in revenue over the past decade, trading both financial contracts and physical commodities such as gasoline and diesel fuel.
CNBC said owning part of the unit could "cost the Qatari fund a billion dollars or more," without providing a source for the sum.
But with a deepening role in illiquid cash markets and physical assets through subsidiaries TransMontaigne Inc and Heidmar Inc, Morgan's division has also become a weight on the bank's capital base as it faces credit pressures.
And new regulations threaten to limit its advantage in trading physical commodities, long its strong suit.
Speaking earlier this week on CNBC, Morgan's chief financial officer, Ruth Porat, said they "look at commodities as an ongoing" business, but could "never say never" about outside investment.
Enlisting a cash-rich investor to help buoy a commodity trading division would be unusual on Wall Street, although there is some precedent for joint ventures.
Louis Dreyfus Highbridge, an energy merchant owned by the French commodity trader and a JP Morgan investment group, has existed for years.
More recently a handful of Sempra Commodities veterans secured the backing of a private equity fund in order to launch a new venture called Freepoint Commodities.
yahoo.com
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