(Corrects headline to reflect that Morgan Stanley will continue
to trade physical oil on a case-by-case basis; corrects
description of TransMontaigne in first paragraph to "oil storage
and transport company" from "pipeline company")
By Anna Louie Sussman
June 9 Morgan Stanley is selling its
controlling stake in oil storage and transport company
TransMontaigne Inc to NGL Energy Partners LP
for $200 million, essentially ending its long run as the biggest
physical oil trader on Wall Street.
The long-awaited deal comes months after the bank announced
its intent to sell most of its global physical oil trading
operations to Russian state-run oil major Rosneft,
including its 49 percent stake in shipping company Heidmar.
It is the latest sign of how growing regulatory pressure is
reshaping commodity markets.
NGL Energy Partners, an up-and-coming master limited
partnership (MLP) that last year bought the oil trading division
of privately held Gavilon, said an additional amount would be
paid for inventory transferred at closing. The refined products
held by TransMontaigne Inc could be valued at up to $550
million, a person familiar with the matter said.
The TransMontaigne MLP includes some 48 fuel terminals with
nearly 24 million barrels of storage capacity on the U.S. Gulf
Coast, in Florida, the Midwest and across the Southeast,
including along the strategically important Colonial Pipeline,
which ships gasoline and diesel from the Gulf to the East Coast.
The bank's power, gas and metals business is unaffected, and
the bank will continue to trade physical oil for its clients,
Morgan Stanley spokesman Mark Lake said.
One of the first banks to build up a major oil trading desk
over two decades ago, Morgan Stanley has been trying to sell or
spin off its physical commodity business for more than a year as
it faces mounting regulatory scrutiny of the risks of owning and
trading physical commodities, as well as higher capital
Building on major jet-fuel supply deals and strategic oil
tank leases in the New York harbor, Morgan bought TransMontaigne
in 2006, taking it deeper into the U.S. oil system years before
the shale oil boom upended oil flows.
Even after they give up their independent investment bank
status after the financial crisis, a 1999 law permitted Morgan
Stanley and Goldman Sachs to remain in commodity activities
engaged in before 1997.
Political pressure has intensified in recent years due to
fears of banks' exposure to potentially catastrophic losses in
the physical business, as well as concerns about the extent of
their influence over the commodity supply chain.
Morgan Stanley launched a formal effort in December to sell
its controlling stake in TransMontaigne.
Morgan Stanley said the sale includes its general partner
and limited partner interests in TransMontaigne Partners LP
The deal, expected to close in the third quarter, is not
material to the firm's overall results, Morgan Stanley said.
(Additional reporting by Neha Dimri in Bangalore; Editing by
Kirti Pandey, Maju Samuel and Peter Galloway)