Mercuria Energy Group Ltd.’s six- month-old agreement to buy JPMorgan Chase & Co.’s physical commodities business for $3.5 billion was revised to cover only $800 million of assets, according to people familiar with the change.

JPMorgan plans to sell the rest of the business in separate transactions, said the people, who asked not to be identified because the final deal’s terms haven’t been made public. Some separate sales have already been agreed, one person said. The Wall Street Journal reported on the changes earlier today.

Trading houses such as Mercuria are filling the void as banks from JPMorgan and Barclays Plc to Deutsche Bank AG and Morgan Stanley withdraw from or scale back physical commodity operations amid increased regulatory scrutiny of lenders owning, storing and trading raw materials. Founded in 2004 by former Goldman Sachs Group Inc. traders Marco Dunand and Daniel Jaeggi, Mercuria has grown to become the world’s fourth-largest independent commodity trader with 2013 revenue of $112 billion.

Among the assets not being purchased by Mercuria include a crude oil supply agreement to a refinery in St. Paul, Minnesota, the refinery’s owner, Northern Tier Energy LP, said in a regulatory filing last month.

Earnings Boost

JPMorgan’s physical commodity business, formerly led by Blythe Masters, has previously generated annual operating profit before compensation costs of $750 million, according to people who have seen documents related to the unit’s sale. That would bring Mercuria, which posted net income of $273 million last year, closer to earnings achieved by competitors Vitol Group and Trafigura Beheer BV.

Mercuria competed with Macquarie Group Ltd. and Blackstone Group LP to enter exclusive negotiations for the unit in February, people with knowledge of the bidding said at the time. The JPMorgan unit, put up for sale last year, was slated to give Mercuria gas and power trading operations on both sides of the Atlantic, physical assets spanning about 40 locations in North America and 6 million barrels of storage leases in the Canadian oil sands.

Mercuria also gets Henry Bath & Sons Ltd., a 220-year-old metal-warehouse operator based in Liverpool, England, that will be operated as a stand-alone subsidiary separated from Mercuria’s trading operations. Henry Bath was a founding member of the London Metal Exchange, and handles products that include aluminum, steel and copper as well as cocoa and coffee, according to its website.

Mercuria, which is registered in Cyprus and has its main trading operations in Geneva, offered jobs to about 200 people, or about half of the unit’s staff, a person familiar with the matter said in March.