Castleton Commodities Offers $1B for Morgan Stanley Oil Trading Unit

Apr 15 2015 | 9:28am ET

Castleton Commodities, a commodities trading house backed by hedge fund magnates Paul Tudor Jones and Glenn Dubin, is willing to pay $1 billion to take Morgan Stanley out of the oil trading and storage business. 

Morgan Stanley has been trying to sell the unit for some time, according to reports in The Wall Street Journal and Financial Times. Previously, negotiations with Qatar’s sovereign wealth fund could not settle on terms for the unit, and a potential deal with Russian oil company Rosneft was scuttled amid concerns related to Moscow’s involvement with the strife in Ukraine.

Castleton’s bid reportedly topped others from Australian bank Macquarie Group and private equity company KKR. 

The deal is not yet final and, if completed, would likely not close until the second half of this year. The sale of the unit has been a top priority for Morgan Stanley CEO James Gorman, who earlier this year sold the bank’s natural gas business to Pentagon Energy. 

A sustained slump in energy prices and increased regulatory scrutiny have induced Wall Street institutions to ditch physical commodities trading divisions, which previously were often considered profit centers.

The businesses are often being absorbed into large, privately-held commodities trading companies who face far less disclosure burdens and do not carry the same regulatory requirements as do big Wall Street institutions. JP Morgan sold its physical commodities business last year, while Goldman Sachs sold a metals warehousing business in December.

Stamford, CT-based Castleton was spun off from Louis Dreyfus Commodities Group energy trading business in 2012 to a group that included Glenn Dubin, the co-founder and former chairman of Highbridge Capital Management, and an a family trust of Paul Tudor Jones.

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