(Adds details on bidding process, Metro profitability)
Dec 22 (Reuters) - Goldman Sachs Group Inc has sold its controversial metals warehousing business to Swiss private equity group Reuben Brothers, the Wall Street bank said on Monday.
The deal for Metro International Trade Services comes months after Goldman formally put the business on the block. Goldman bought Metro for an estimated $550 million in 2010, capitalizing on a surge in demand for storing base metals such as aluminum as demand slumped.
But the bank came under fierce political and regulatory pressure to divest the Detroit-based operation amid allegations it had encouraged hoarding supply, inflating metals prices. Goldman has denied it did anything wrong.
Last month, Goldman executives testified before a Senate subcommittee on the matter, and reaffirmed the company’s intention to sell the metals warehousing unit.
The deal is the latest in a string of commodity and energy market acquisitions by private equity groups, who are partly filling a void left by global banks that have been withdrawing from parts or even all of the volatile raw materials markets.
Terms of the transaction were not disclosed.
A person familiar with the matter said Goldman earned a profit from the Metro business over the duration of its ownership. A second source said Goldman recouped its initial investment in Metro last year. Neither source was authorized to speak publicly about the matter.
From the time it purchased Metro, Goldman had planned to sell the business within 10 years, but accelerated its timetable. Reuters first reported Goldman’s plans in April.
Most of the bidding came from international buyers, including interest from companies in China, but ultimately the bid from Reuben Brothers won out, one of the sources said.
Reuben Brothers has a history in steel and iron ore investments through its metal trading company Metalloyd. In April, the firm sold its stake in Erus Metals, a small warehousing company based in the U.K., to commodity trader Gerald Group. (Reporting by Jonathan Leff, Josephine Mason and Lauren Tara LaCapra in New York; Editing by Jeffrey Benkoe)
Our Standards: The Thomson Reuters Trust Principles.