Cargill, one of the world’s largest commodity traders, has agreed to sell its petroleum business to Australia’s Macquarie, the infrastructure and natural resources focused investment bank.
The sale of the Geneva-based petroleum business comes as Cargill, which is primarily focused on agricultural commodities, looks to streamline its business during a tough period for the sector.
For Macquarie, the deal will give its commodity business its first office in the trading hub of Geneva, where the majority of the 140-strong Cargill Petroleum team is based.
The transaction is expected to close later this year, Cargill said in a statement. Terms of the deal were not disclosed.
The move marks a partial reversal for Cargill from four years ago when David MacLennan, who is now chief executive and chairman of the privately held US company, said he was looking to move deeper into energy trading as increased regulatory pressure pushed some banks out of the sector.
While some banks such as Morgan Stanley, Deutsche Bank and JPMorgan have scaled back their commodity divisions, others — particularly Macquarie — have continued to expand.
The Australian bank is not registered as a deposit-taking bank in the United States, meaning it has faced less onerous restrictions than some of its rivals, especially in trading physical commodities. It has become one of the biggest banks in the sector over the past five years.
“With Macquarie’s strategic focus and commitment to energy and commodities, we are certain this talented team will excel in its organisation,” said David Dines, president, Cargill Energy, Transportation and Metals.
By getting a foothold in Geneva, — one of the world’s main commodity trading hubs alongside London, Houston and Singapore — the bank will have a platform to expand its trading operations in Europe.
Nick O’Kane, global head of energy markets at Macquarie Group, said the acquisition would bring “greater reach to the Macquarie platform . . . positioning us for continued growth”.
Reflecting the importance of natural resource trading to Macquarie the banks equivalent of a fixed income division is called the Commodities and Financial Markets group. Most other banks group commodities under FICC, or Fixed Income, Currencies and Commodities.
In Macquarie’s 2016 financial year, which closes at the end of March, the division made A$576m (US$441m) in net profit.
Cargill said it will continue to trade in other energy markets including North American gas and power, as well as continuing to offer financial hedging and risk management, including in oil and refined products.
JPMorgan acted as exclusive financial adviser to the Minneapolis-based company.
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