Macquarie Group has moved deeper into commodities with its second deal with US group, Cargill in as many months – this time to by the American commodities giant’s North American power and gas trading business. The deal comes just under three months after Macquarie bought Cargill’s oil trading business for an undisclosed amount.
The electricity and gas deal is the latest business Cargill is retreating from as it focuses on its core business of selling and processing foodstuffs.
In recent years the world’s biggest agricultural trading house has exited lines including steelmaking (selling its 50% stake in the North Star steel operation to its partner, BlueScope Steel), crop insurance and hedge-fund management.
In 2014, Cargill closed its global coal and European power and gas trading businesses.
Macquarie is one of the last banks to remain active in physical commodities trading. It ranks as the third-largest wholesale gas marketer in North America after BP and Royal Dutch Shell, according to Natural Gas Intelligence.
That puts it at the heart of President Trump’s badly flawed strategy of trying to boost the US coal industry and employment which has been hit hard by the flood of shale gas into the market in recent years.
“The acquisition of Cargill’s North America power and gas trading business expands the geographic and service coverage in key markets for Macquarie in the region,” said Nick O’Kane, Macquarie’s global head of commodities in a statement. Macquarie and Cargill did not disclose terms of the deal.
The petroleum business Macquarie is buying trades crude oil and refined products with offices in Geneva, Houston, Minneapolis, Shanghai and Singapore.
“We see a historical opportunity for continued growth and customer engagement across the energy spectrum,” Mr O’Kane said. This buy gives Macquarie a foothold in the Swiss commodities sector with the offices it is buying in Geneva.
Both the power and gas and oil transactions are expected to be completed by the end of this year.
Because Macquarie is not registered as a deposit-taking bank in the United States, it is able to expand into commodities, unlike some of its bigger rivals such as Goldman Sachs which have been forced to quit much of the sector due to changes in US bank regulation which have made it tougher to take big trading positions, or own commodities related businesses
Macquarie has therefore faced fewer restrictions than some of these rivals, especially in trading physical commodities. It has become one of the biggest banks in the sector over the past five years. (It’s US operations are focused on funds management, not banking).
“With Macquarie’s strategic focus and commitment to energy and commodities, we are certain this talented team will excel in its organisation,” said David Dines, president, Cargill Energy, Transportation and Metals said in a statement in March.
Nick O’Kane, global head of energy markets at Macquarie Group, said in March the acquisition would bring “greater reach to the Macquarie platform . . . positioning us for continued growth”. No doubt the latest deal adds to that reach.