18 November, 2009
DEALTALK-Advisers to pull in hefty fees from fertilizer wars
(For more Reuters DEALTALKS, click [DEALTALK/])
* Advisers likely to get hefty fees in fertilizer tie-up
* Failed hostile deals can still be lucrative for advisers
NEW YORK, Nov 18 (Reuters) - One clear winner has already emerged from the so far inconclusive fertilizer takeover wars: the bankers, lawyers and other advisers working on the deals.
Fertilizer makers CF Industries Holdings Inc (CF.N), Agrium Inc (AGU.TO) and Terra Industries Inc (TRA.N), normally low profile companies, have hired some of New York's top banking talent to advise them in the 10-month saga.
Agrium has hired Goldman, Sachs & Co (GS.N) -- which has put its head of M&A for the Americas, Tim Ingrassia, on the deal -- as well as RBC Capital Markets and Scotia Capital to act as its advisers.
CF has Morgan Stanley's (MS.N) merger chief Robert Kindler advising on the deal.
Credit Suisse (CSGN.VX) is serving as Terra's financial adviser, with vice chairman David DeNunzio among the bankers working on the deal.
No specifics on adviser fees have been disclosed for any of the bankers, but some of the advisers will be in line for a payout even if no deal is reached, said Freeman Consulting Vice President Lam Nguyen.
CF Industries launched its hostile bid for Terra in January, and Canada's Agrium followed up with its own bid for CF a month later. Agrium's offer is contingent on CF ending its pursuit for Terra.
CF has put a slate of three directors up for election at Terra's annual meeting, which is scheduled for Friday. That vote could mark the beginning of the endgame for what some have taken to calling the fertilizer wars.
Historically, bankers' fees for mergers and acquisitions have been 1 to 3 percent of the deal size.
Nguyen said that if banks help a target successfully defend itself, they are often paid a full fee -- and even a success premium -- for their work.
"That's because they did a good job defending the company," Nguyen said. "But on the acquirer's side, typically the adviser is just getting a small amount -- some retainer fees" -- if the acquirer fails to complete a deal.
Thomson Reuters estimates that in Exelon's (EXC.N) failed takeover of NRG (NRG.N), NRG's four bankers were paid about $16 million each -- about 1 percent of the enterprise value of the deal. On the other hand, Exelon's advisers received only between $10,000 and $25,000, according to Reuters Estimates.
The advisers for companies who fail to acquire their targets are not always left in the cold. Advisers for failed hostile acquirer BHP Billiton (BHP.AX) and target Rio Tinto (RIO.L) both received sizable fees despite the deal's collapse, according to media reports.
CF's bid for Terra is currently valued at about $4 billion -- 1 percent of that would be roughly $40 million. One percent of Agrium's $4.9 billion bid would be about $49 million.
HIGH POWERED ATTORNEYS
The firms have also hired high-wattage law firms to handle their strategy. CF is using Skadden, Arps, Slate, Meagher & Flom. Agrium has hired Paul, Weiss, Rifkind, Wharton & Garrison and Canada's Blake, Cassels & Graydon. And Terra has retained both Cravath, Swaine & Moore LLP and Wachtell, Lipton, Rosen & Katz.
Law firms generally bill on an hourly basis for transactional work, and top corporate lawyers can bill as much as $1,000 an hour for their services.
A partner at another top law firm who asked not to be identified said he would be shocked if any of the U.S. firms pulled in less than $2 million for its services.
"It tends to consume a lot of people and they're not all working continuously for ten months on this, but there are going to be periods of intense activity," said Morton Pierce, chairman of law firm Dewey & LeBoeuf's mergers and acquisitions group.
"You're talking about the very sophisticated end of the legal profession. It's like going to a heart surgeon. For most companies there are few situations that would be as important ... You're going to go to the very best and you're going to pay for that." (For more M&A news and our DealZone blog, go to www.reuters.com/deals) (Additional reporting by Jessica Hall; Editing by Gary Hill)
Source: http://www.reuters.com
DEALTALK-Advisers to pull in hefty fees from fertilizer wars Added: (18.11.2009)
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