UBS sells off units to JPMorgan
22 December 2008
UBS AG, Switzerland's biggest bank, agreed to sell its agricultural and Canadian energy-commodities units to JPMorgan Chase & Co as part of the Swiss bank's strategy to slim down its unprofitable investment-banking arm. Terms of the deal, set to close in the first quarter, weren't disclosed. The bank also said it is in talks with other parties to sell off other commodities activities.
JPMorgan had bought all of the Canadian-based commodities energy business, Canadian Energy, from UBS's investment bank by purchasing shares in UBS Warburg Energy Holdings, UBS said in a statement.
JPMorgan is also buying UBS's Global Agricultural Commodities business.
The bank, which received a $59.2 billion aid package from the Swiss government and central bank this year, said in October it would sell divisions to focus on the securities and advisory businesses. UBS has slashed 9,000 jobs since the credit crunch began, the most at any European bank, and posted almost $49 billion in losses and write-downs. (See: Credit Suisse rescues itself, UBS gets funds infusion)
For Zurich-based UBS, the sale is part of a plan to all but exit commodities trading, which the bank entered into long after Wall Street rivals only to seek a quick exit once it became mired in losses on illiquid securities last year. UBS will now only run a precious metals and exchange-traded commodities arm, part of a dramatic reduction of investment banking under unit head Jerker Johansson.
''The investment bank is exiting all of its commodities businesses, with the exception of precious metals and the index and exchange-traded commodities activities," UBS said.
The addition of these businesses and talented teams further expands our North American energy franchise and provides further depth to our growing agricultural and soft commodities platform," said Blythe Masters, head of global commodities at JPMorgan.
UBS also confirmed Monday that it will get a two billion Swiss francs loan ($1.81 billion) from the covered bond bank of Swiss mortgage institutions, in a deal that has been facilitated by the Swiss National Bank. The medium-term loan will be secured by Swiss prime mortgages, UBS spokeswoman Eveline Mueller said. The loan provider will refinance itself through the issuance of a fully subscribed covered bond, she added.