PARIS (Reuters) - Societe Generale (SOGN.PA) has put up for sale its stake in Newedge, a futures and clearing brokerage it co-owns with Credit Agricole (CAGR.PA), a source familiar with the situation said on Tuesday, as the No. 2 French bank looks to shrink its balance sheet and sell risky assets.
“Newedge is definitely for sale,” the source said, adding that the bank could also sell its custody and securities unit SGSS but no firm decision had been reached on that.
“Both of these are fairly difficult to sell,” the source said, adding: “I wouldn’t hold my breath” on a successful sale.
Societe Generale, whose shares soared 17 percent on Tuesday as part of a broader rally in European banking stocks, declined comment.
Newedge USA LLC is the biggest commodity brokerage in the United States, having the biggest customer segregated account out of all the futures commission merchants listed with the U.S. Commodity Futures Trading Commission (CFTC), at more than $24 billion, according to the CFTC website.
Newedge has an estimated 12.1 percent market share for execution and clearing on global listed derivatives exchanges, according to its website.
“No EU based bank (would be able to buy Newedge) but maybe Macquarie Bank is a candidate for the right price, otherwise one of any of the top IV Chinese banks,” one veteran soft commodity dealer based in New York said, referring to the top four banks in China.
He cited China’s top four banks as possibly being interested in buying Newedge due to that country’s strong currency, their large amount of available cash and access to an “incredible data base”.
Commodities have also been a core business for Macquarie Group (MQG.AX), Australia’s top investment bank. But with its trading and investment banking units facing a tough market, the bank has been bulking up its annuity-style businesses such as lending, corporate and asset finance to diversify revenue.
The source familiar with the situation said of Newedge, “It has a big, big balance sheet and balance sheets are complicated these days.”
Morgan Stanley (MS.N) and Deutsche Bank, reported by French business daily Les Echos to be advising SocGen on the possible sale, had worked quite a lot on a possible deal but that there was no auction at the moment, a second source familiar with the situation said.
Societe Generale, whose shares have lost about half their value over the last three months, earlier this month said it would cut costs and sell assets to free up 4 billion euros in fresh capital. At the time, some analysts included the SGSS unit as among units likely to go on the block.
Earlier this month, sources had said SocGen was considering offloading business units in its Global Investment Management and Services division, with Newedge being the most likely candidate.
Credit Agricole also declined comment on the possible sale of SocGen’s stake in Newedge, formed in 2008 from a combination of Credit Agricole’s Calyon Financial and SocGen’s Fimat unit.
Reporting by Christian Plumb, Julien Ponthus and Lionel Laurent in Paris and Marcy Nicholson in New York; editing Bernard Orr