Energy Arbitrage Partners, a firm founded by Simon Greenshields, former co-head of Morgan Stanley’s commodities department, has acquired the legendary commodities firm Phibro, previously known as Philipp Brothers, a trading powerhouse during the past century.
The new Phibro business, operated through Phibro LLC, will be a commodity merchant company focused on generating returns from the acquisition and development of assets with associated trading, structuring and marketing activities.
Simon Greenshields, who led Morgan Stanley’s commodity business to consistent profitability from 2008-2015, will assume the role of president and CEO of the new Phibro business. Nick Elliot and Thomas Funk, previously key members of Morgan Stanley’s highly successful commodities business will be joining Phibro LLC as partners.
“We are excited about the acquisition and look forward to returning the Company to its commodity merchant roots,” said Simon Greenshields. “The continued volatility in these markets, in addition to the departure of several formerly large and important players, has created an environment where an entrepreneurial merchant firm can create value by capitalizing on market dislocations.”
“While most commodity investment approaches have an inherent long bias, our strategy is not premised on making directional predictions about commodity prices. Instead it is based on a proven track record of relative value arbitrage combined with disciplined risk management and strong client relationships. EAP is currently engaged in discussions with a number of potential financial partners that share our approach to commodity investing,” Greenshields concluded.
Founded in 1901 by Julius & Oscar Philipp in Hamburg, Germany, Philipp Brothers, or Phibro, as it became known, had a long heritage of innovation in the commodities markets. The business was a pioneer in the development of liquidity and prince transparency in the global commodity markets. It operated in the US since 1915. Philipp Brothers merged with Engelhard Minerals & Chemicals in 1967. In 1969 Anglo American purchased a controlling interest in Engelhard Minerals.
The controversial late billionaire Marc Rich, father of modern oil trading and founder of the group that became Glencore Xstrata (LSE:GLEN) (ADR)(GLNCY), began his career at Phillipp Brothers at the age of 20. He left in 1974 with a fellow graduate of the Phibro mailroom, Pincus “Pinky” Green, to set up Marc Rich and Co AG in Switzerland. That group would eventually become Glencore.
In 1981 the company was spun off as Phibro Corporation, and that same year the company subsequently acquired Salomon Brothers for $550 million, creating Phibro-Salomon Inc. Phibro Energy, Inc. was established in 1984, absorbing the oil department of Philipp Brothers. In 1986, the combined company removed the Phibro name from the parent company. In 1988 Phibro became the largest independent oil refiner in the US. In 1993, Phibro Energy, Inc. became the Phibro Energy Division of Salomon Inc. It was renamed to simply “Phibro” in 1996, and in 1997, Salomon was acquired by Travelers Group, which merged with Citicorp to form Citigroup in 1998. With the merger, Salomon became an indirect, wholly owned subsidiary of Citigroup.
In 2009, after a public furor over a $100 million payday for famed oil trader Andrew Hall, Occidental Petroleum (Oxy) acquired Phibro from Citigroup. Phibro then became part of Oxy’s “Midstream, Marketing and Other segment”, which includes Oxy’s gas plant, pipelines, marketing, trading, and power generation operations.
“Mr. Hall and his traders were known for placing big, long-term bets. In 2007, Phibro accounted for 10% of Citigroup’s net income,” according to The Wall Street Journal, which added that, in 2014 Phibro closed its doors in the U.S. after failing to find a buyer.
The new Phibro will be an independent new commodity merchant company focused on asset acquisition, project development, and trading. Its principals have deep expertise across commodities including oil and oil products, natural gas, natural gas liquids (NGL), electricity, renewable fuels, fertilizer, and coal. Phibro’s headquarters are located in Westport, Connecticut, with additional offices in London, Ireland and Singapore.
Energy Arbitrage Partners is an employee owned partnership focused on commodity investments. It is currently engaged in the development of a number of businesses including projects in natural gas liquids, fertilizer and petrochemicals, energy exploration and production, renewable fuels, and power generation.