By Dow Jones Business News,
December 20, 2013, 02:31:00 PM EDT
By Everdeen Mason
Morgan Stanley ( MS ) said it plans to sell the global oil merchanting unit of its commodities business to Rosneft Oil
Co., comfirming plans to scale back its commodities operations.
The unit provides services including the storage, trading and transportation of oil and refined products. Morgan
Stanley said it doesn't expect the sale to affect its results and didn't disclose the financial terms.
The sale includes items such as oil terminal storage agreements, physical oil purchases, investments, and more. Morgan
Stanley will also transfer its 49% investment in Heidmar Holdings LLC., which manages pools composed of about 100
independently owned commercial tankers, to Rosneft.
Morgan Stanley helped pioneer trading of raw materials on Wall Street, buying and selling physical supplies of
everything from copper to crude oil and taking stakes in companies that move commodities around the world.
But the bank's revenue from commodities trading has declined for five years in a row, on pace to be in the range of $
700 million in 2013, down from nearly $3 billion in 2008, The Wall Street Journal reported earlier this week, citing
people familiar with the unit's performance.
The retreat at Morgan Stanley mirrors similar moves at other banks, as they face regulatory constraints on commodities
trading and flat or declining prices in many markets.
Commodities markets have performed poorly compared with stocks over the last three years, as surging production and
slow economic growth weigh on prices for goods such as corn, copper and oil.
A third of Morgan Stanley's commodities front-office personnel in the U.S., U.K. and Singapore, or about 100
executives, will move to Rosneft as part of the deal.
Morgan Stanley said it will keep its client-facilitation oil trading business, as well as its stake in any non-oil
commodities operations. The company continues to hold and is exploring options for its stake in TransMontaigne Partners
LP, an oil storage, marketing and transportation company.
The deal is expected to close in the second half of next year.
Morgan Stanley's performance has improved lately on its strong wealth management business.
Write to Everdeen Mason at firstname.lastname@example.org
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