Morgan Stanley officials are in advanced talks with a Middle Eastern sovereign-wealth fund, the Qatar Investment Authority, about an investment in the bank's commodities unit, say several people familiar with the matter, and a deal could be imminent.
Such a sake could give the Qatari fund a toehold in the robust global business of trading paper and physical stocks of commodities like crude oil, natural gas, and metals, while at the same time providing an influx of capital for Morgan Stanley.
Talks between the two entities have in recent days centered on the notion of the QIA purchasing a minority stake in Morgan's commodities business, according to one of the people familiar with the matter. One current concern, according to another person familiar with the matter: making sure that the most talented traders in the division are contractually obligated to stay on board.
Owning part of Morgan's commodities trading unit could cost the Qatari fund a billion dollars or more. Even though the second quarter generated relatively low revenue amid spiraling crude-oil prices (New York Mercantile Exchange: CLCV1), among other factors, the bank's commodities division has historically made between $2 billion and $3 billion per year, people with knowledge of the business have said. The unit also includes significant physical assets, including TransMontaigne Inc., a Denver-based commodities logistics company, which could sweeten the price even during this turbulent trading period.
Still, the exact terms of the potential deal could not immediately be determined. And the people familiar with the matter cautioned that the discussions could yet fall apart. A spokesman for Morgan Stanley (MS) declined to comment on the possibility of a sale, and representatives for the Qatari sovereign-wealth fund did not respond to requests for comment.
During an interview with CNBC on Wednesday to discuss her firm's second-quarter earnings, Morgan Stanley chief financial officer Ruth Porat said that while "we look at commodities as an ongoing" business, "never say never" when it comes to handicapping an eventual sale or outside investment in the unit.
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