JP Morgan Chase clinches deal for RBS Sempra assets
ROYAL Bank of Scotland (RBS) has struck a deal with JP Morgan to sell off part of its RBS Sempra joint venture after months of negotiations.
The US investment bank will pay around $1.7bn (£1.1bn) for the global metals and oil operations along with the European energy business.
However, the deal excludes RBS Sempra’s North American natural gas and power arm.
JP Morgan had initially expressed an interest in buying the whole business in a deal which could have been worth as much as $4bn.
However, concerns over President Obama’s plans to crack down on risky trading activity within the banking sector led it to rethink its position.
The deal nevertheless gives RBS a 47 per cent share of the proceeds from the sale.
Bruce Van Saun, RBS group finance director, said: “We are pleased to have expeditiously reached agreement on the divestment of these unique assets. We believe we have struck a fair price and contract with JP Morgan. The remaining assets, namely the North American Power and Gas businesses, remain of high value and are performing well.”
RBS was ordered to sell off its stake in the business by the European Commission last year after receiving billions of pounds in state aid to keep it afloat during the height of the financial crisis. It must also put its RBS-branded branches in England and Wales, its NatWest branches in Scotland, the Churchill and Direct Line insurance arm and parts of its investment banking business up for sale in the coming years.
The metals, oil and European energy operations will now be integrated with JP Morgan’s existing global commodities operations as it looks to take on the likes of Goldman Sachs and Morgan Stanley within the commodities arena.
The deal is expected to go through in the second quarter of the year although it is still subject to regulatory approval from the Financial Services Authority (FSA) and various anti-trust regulators.
RBS had a 51 per cent stake in Sempra after forking out $1.35bn in July 2007 and is expected to break even on its investment when the remaining section of its stake is sold off. US-based Sempra Energy owned the remainder of the joint venture.