UPDATE 4-JPM strikes $1.7 bln deal to buy RBS Sempra units

* Sempra’s share of proceeds will be $941 million

* Could clear way for Sempra to buy JV’s U.S. operations

* Sempra shares slip 0.4 pct, RBS up 5 pct

* JPMorgan shares fractionally higher
(Adds analyst comment, share prices, bylines)

By Clara Ferreira-Marques and Matt Daily

LONDON/NEW YORK, Feb 16 (BestGrowthStock) – JPMorgan Chase & Co
will buy the non-U.S. assets of commodities joint venture RBS
Sempra from Royal Bank of Scotland and Sempra Energy for $1.7
billion cash, roughly doubling its commodities client base.

The deal could clear the way for Sempra (SRE.N: ) to buy out
RBS and take total control of the joint venture’s U.S. trading
operation, which provides Sempra with a key profit stream.

Sempra executives told a conference call they may buy RBS’s
stake in the U.S. operations of the joint venture, although
they remain open to seeking an outside buyer or partner to
replace RBS (RBS.L: ).

Sempra has appointed JPMorgan as its adviser as it reviews
alternatives.

JPMorgan (JPM.N: ), which has been expanding its commodities
arm aggressively in recent years, will take the RBS Sempra
global oil and metals and European power and gas assets under
the deal, which is set to close in the second quarter.

The bank initially was in talks to buy the whole joint
venture. But a proposal by the Obama administration to prohibit
proprietary trading by banks prompted JPMorgan leave behind RBS
Sempra’s North American power and gas assets.

“I have a high probability chance that Sempra will buy it
back,” said Lasan Johong, analyst at RBC Capital Markets.

Valuing the entire partnership at about $4 billion, he
said, Sempra could likely buy the U.S. operation for about $88
million, plus its share of the proceeds from the JPMorgan deal
announced on Tuesday.

“Given the net economics of the business, this is pretty
much a no-brainer,” he added.

Partly-nationalized RBS has been forced to slim down and
sell off a string of assets, including its stake in RBS Sempra,
which it acquired in April 2008, to appease European Union
antitrust concerns after it received billions in state aid
during the financial crisis.

The sale of a major part of the RBS Sempra venture marks a
key step forward for RBS, which has signaled it wants to move
quickly to put the past, and uncertainties related to the
sales, behind it.

TOP TIER

JPMorgan is eager to expand its commodities arm, run by
Blythe Masters, who has said she wants the bank to become a
top-tier franchise globally.

JPMorgan strengthened its North American power and gas
assets with the 2008 acquisition of Bear Stearns. Snapping up a
large part of RBS Sempra will boost the bank’s aim of taking on
the top three commodities firms: Goldman Sachs (GS.N: ), Morgan
Stanley (MS.N: ) and Barclays (BARC.L: ).

“This helps us build out our capabilities so that there’s
really nothing to separate us from the bulge bracket players
who have dominated in this space for the last couple of
decades,” Masters told Reuters.

Traders at RBS Sempra — 49 percent owned by Sempra Energy
and 51 percent by RBS — welcomed the news of the deal after
months of uncertainty prompted a string of staff departures.

“It’s lovely to have some news after four months of knowing
nothing. It all looks promising,” said a trader at RBS Sempra.
“I wouldn’t expect any job losses … This will be a complement
and (it) takes us into a different league.”

SEMPRA OPTIONS

Sempra Chief Executive Donald Felsinger said Sempra and RBS
would adjust their current ownership to a a 50-50 split after
the deal closes in order to make it easier for RBS to sell its
U.S. stake.

Sempra said its share of the sale proceeds was expected to
be $941 million. The San Diego utility owner generated $274
million in profit from its commodities trading operations in
the first nine months of 2009, or about a third of its
earnings.

Chief Financial Officer Mark Snell said the company was in
talks with both RBS and JPMorgan for the banks to provide
liquidity and credit support to Sempra in the event it was to
buy out RBS’s stake so that it would not have raise money to
support the operation through a share issue.

“That is really the only way that we think this would be a
good deal for our shareholders is if we could do a transaction
and keep any kind of equity dilution to an absolute minimum or
none at all,” he said.

Under the current structure, RBS’s balance sheet carried
the liabilities for billions of dollars of trade from the JV’s
trading operations.

JPMorgan shares were up 91 cents to $38.86, while Sempra
shares pared earlier gains and fell 0.4 percent, or 18 cents,
to $49.30, both on the New York Stock Exchange. RBS closed up
5.3 percent in London.

Stock Market

(Additional reporting by Emma Farge in London and Elinor
Comlay in New York; Editing by Dan Lalor, John Wallace and
Steve Orlofsky)

UPDATE 4-JPM strikes $1.7 bln deal to buy RBS Sempra units