London, 7 January 2010

Reuters: Royal Bank of Scotland (RBS.L) and Sempra Energy (SRE.N) have received bids for their commodities joint venture from a trio of banks keen to expand in the booming business, a person familiar with the matter said.

Deutsche Bank (DBKGn.DE), JPMorgan Chase (JPM.N) and Australian bank Macquarie (MQG.AX) each submitted offers worth nearly $4 billion for the RBS Sempra unit by the Wednesday deadline, the source said on Thursday.

RBS Sempra, which trades commodities from oil and natural gas to metals and agricultural products, would offer entry into a rapidly growing market for any of the three banks and a chance to significantly bulk up in commodities.

The European Union has forced RBS -- majority-owned by the British government -- to sell its 51% interest in the business, formed only in 2008 after RBS acquired a controlling stake in Sempra Commodities for $1.7 billion.

Sempra Energy is also considering selling its stake, sources have told Reuters. The California utility operator has an option to reacquire the RBS stake in the business, if it is sold.

RBS Sempra, whose antecedents include such colourful names as Enron and Metallgesellschaft Ltd, is a big player in the London metals market, while its energy business is largely focused around U.S. utility Sempra Energy.

Much of its business centres around Michael Hutchinson, a towering figure in the closely knit metals community, who stood down as non-executive chairman from RBS Sempra last year, after four decades in the business.

Both parties stand to gain if they sell the business for $4 billion, as RBS paid $1.7 billion for its stake in April 2008 and Sempra Energy invested $1.6 billion, though there were differences of opinion over a final price.

RBS, Deutsche Bank, and Macquarie all declined to comment. JPMorgan was not available to comment.

Suitors Pitch

Several investment banks have bulked up in commodities in recent years and hold strong market positions, led by the top three of Goldman Sachs, Morgan Stanley and Barclays Capital.

Others have been forced to backtrack, as shown by Citigroup's divestment of its Phibro energy trading business, but with about 20 firms at the start of the sale process, there was lively interest for RBS Sempra.

Deutsche Bank said recently it aimed to be among the world's top five commodities firms. It is now sixth.

New York-based JP Morgan has picked up assets and market share after weathering the financial crisis better than most rivals. Macquarie, which operates in 28 countries, is already active in commodities.

RBS has four years to sell its stake, but is attempting to sell it quickly, as the business would lose value if uncertainty about the business persists and staff jump ship.

There were reports of a management buy-out by RBS Sempra's staff, who might prefer to own the business themselves, rather than work for a bank. That plan could still materialise, should a sale fall through, market sources have said.

Ends --

Source: Reuters