Castleton Commodities International will buy Morgan Stanley's physical oil business, the largest and oldest on Wall Street, vaulting the Connecticut-based merchant into the big leagues of global crude and fuel traders.
In a long-awaited deal that appears to mark the end of the Wall Street bank's more than three-decade history as a major player in physical oil markets, Castleton will gain several dozen oil tank storage leases, physical oil supply and purchase contracts, and a team of about a hundred traders.
Neither Morgan Stanley nor Castleton released terms of the transaction, but analysts estimated the deal to be valued at slightly more than $1 billion. This principally represents the value of oil inventories in storage or transit. The deal will not be material for Morgan Stanley, the bank said.
Castleton, a Connecticut-based trading group now owned by a private equity group of hedge fund and trading veterans, will have more scale and scope to compete in the massive global oil market.
The deal "aligns well with our goal of becoming a top-tier, global multi-commodity merchant," said CCI's Chief Executive and President William C. Reed II, a former Enron and hedge fund trader who has been running the firm since 2008.
Morgan's Global Oil Merchanting unit has traded around 2 million barrels per day (bpd) of crude and oil products over the past five years, and has 45 oil storage leases for some 30 million barrels, mainly in the United States and Europe, CCI said.
About a hundred front-office staff, including traders and shippers, are expected to move to CCI with the transaction, according to a person familiar with the deal. In total, as many as 200 employees may transfer to CCI, a second person said. The bank's Tom Simpson and Fabrizio Zichichi will lead CCI's global oil trading business, the firm said.
The bank still plans to sell its stake in oil tanker group Heidmar, which was not part of the deal, a source said.