Morgan Stanley (MS) recently closed the divestiture of its 100% indirect ownership interest in TransMontaigne Inc. to NGL Energy Partners LP (NGL) for nearly $547 million. NGL Energy Partners is a Tulsa, OK-based company dealing in propane business, while TransMontaigne Inc., wing of Transmontaigne Partners L.P. (TLP), is an oil storage, marketing and transportation company.
Out of the total amount paid by NGL Energy Partners, the cash purchase price of the deal was $200 million, which accounted for the value of the working capital of the acquired unit. Further, NGL Energy had to pay the remaining $347 million for the inventories acquired as part of the deal.
The transaction was announced in Jun 2014. Per the deal, Morgan Stanley also vended the limited partnership interest of TransMontaigne Partners held by its affiliates. Moreover, the company transferred related assets including inventory and pipeline, and other contract rights to NGL Energy Partners.
TransMontaigne Inc. was acquired by Morgan Stanley way back in 2006 given the uptrend in oil business. However, with time, the commodity trading business lost its innate luster owing to the decline in profitability as well as stringent regulatory checks.
Therefore, the Wall Street biggie was trying to spin off the relatively unprofitable business units over the past one year. Consequently, in Dec 2013, Morgan Stanley entered an agreement to vend its Global Oil Merchanting unit to Russia-based Rosneft Oil Company’s wholly owned subsidiary.
Apart from Morgan Stanley, other banks including JPMorgan Chase & Co. (JPM), Bank of America Corporation, Barclays Plc and Deutsche Bank AG are in the process of winding up their commodity trading businesses.
Morgan Stanley currently carries a Zacks Rank #3 (Hold).
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