Bankers feasting on Schering-Plough/Merck deal…
Yesterday, Schering-Plough (SGP) filed this amended S-4, updating information in their May 20 filing (which we footnoted here). While much of the information wasn’t new, there were some new disclosures on how much the bankers providing the advice to Schering-Plough and Merck (MRK) are making on the $44 billion deal that was announced back in March.
According to the filing, JPMorgan (JPM), Goldman Sachs (GS) and Morgan Stanley (MS) are all providing advice to the pharmaceutical giants. The cost of that advice? About $100 million. Here’s how it breaks down according to the filing: JP Morgan will collect $45 million from Merck; Goldman will get up to $33.3 million from Schering-Plough and Morgan Stanley, which acted as an additional financial advisor to Schering-Plough and provided the all-important “synergies valuation” will collect $22 million. Indeed, the word synergy (or some variation) is used over 50 times in the filing.
Also interesting is that Goldman and Morgan Stanley each collected 1/3 of their fees up front, while JP Morgan has only collected $5 million so far. Of coure, maybe that’s normal when it comes to advising the acquiree. Still, it’s hard to imagine what the three firms could have done collectively to be worth $100 million in fees.
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Posted in Tags: M&A, new disclosures |
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June 17th, 2009 at 9:15 pm
Great digging, here!
I did see this yesterday, in the S-4, as amended, but then went off to scout the Pfizer deal’s fees — as it is about a third larger than the SCH-Merck deal.
From the Pfizer S-4 we can confidently deduce that Morgan Stanley (advising Wyeth) will receive $65 million, of which $50 million is contingent on the deal’s closing, and Evercore will receive $24 million, of which $19 million is contingent upon a closed deal.
More murky is the fee total for Pfizer’s half on the deal. I honestly cannot find it in the various 424’s, 425’s and S-4/A’s PFE has filed. Bloomberg reports it thus:
“. . . .Pfizer’s advisers — Bank of America, Goldman Sachs, JPMorgan, Barclays Plc and Citigroup Inc. — together may get $82 million in fees, not counting what they’ll earn arranging a $22.5 billion one-year loan that will be replaced later with bonds. . . .”
OTOH, Bloomberg estimates the fee grand total at over $200 million for PFE-WYE advisors.
If that is accurate, PFE-WYE dwarfs SGP-MRK on fees, and is grotesquely out of proportion (at over twice the fee-level, but only one-third larger in transaction value).
It could be argued that PFE-WYE advisors were deeper in melt-down, while they evaluated the financing, and acquring risks — and by comparison, SGP-MRK advisors faced a less troubled market in March of 2009 — but that argument doesn’t cut a whole lot of ice.
No, I think the PFE-WYE deal takes the “Golden Trough” award, for 2009 — and perhaps the decade. By the way, the WSJ Blog copied your stuff, but totally missed this PFE-WYE angle in its recital of outsized fees of the decade. Do let them know. Heh.
Again, Great stuff — and, Namaste!
PS: I may post this comparison of the two deals’ fee-levels, on mine, later tonight.
June 17th, 2009 at 9:20 pm
FYI, here is the link — see pages 83 (Morgan Stanley fees) and 92 (Evercore fees) — to the S-4/A:
http://www.sec.gov/Archives/edgar/data/78003/000095012309013052/y74822a3sv4za.htm#121
And, the January 26, 2009 Bloomberg link — for the PFE-WYE fees estimate — guess-timate, really:
http://www.bloomberg.com/apps/news?pid=20601087&sid=aviIaVfGbqjM&refer=home
Namaste
June 20th, 2009 at 10:23 pm
Michelle and Condor,
You guys almost sound upset/concerned with the size of the fees? These are totally consistent with the norms (these are huge deals) and are much needed for the infrastructure that exists on wall street. Gotta keep the lights on. You can’t imagine how many deals AREN’T taking place, and these firms are committing resources to deals that happen and don’t happen. This is the grease of capitalism, unlike what Washington is doing in taking over unionized Detroit