$40m M&A fees windfall

16/06/2015 - 15:59

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With the takeovers of iiNet and Amcom Telecommunications heading into the final stretch, the investment bankers and other advisers that worked on these deals will be looking forward to a very handy pay day of more than $40 million.

$40m M&A fees windfall
iiNet chairman Michael Smith.

With the takeovers of iiNet and Amcom Telecommunications heading into the final stretch, the investment bankers and other advisers that worked on these deals will be looking forward to a very handy pay day of more than $40 million.

Buried in the 336-page scheme booklet for TPG Telecom’s acquisition of iiNet was a note disclosing that the two companies will be paying $31 million to their advisers.

iiNet will be paying up to $22 million, with the largest beneficiary likely to be its financial adviser Azure Capital, which has had a long-running defence mandate with the telco.

Other iiNet advisers include law firm K&L Gates, auditor EY, tax adviser PwC and independent expert Lonergan Edwards.

The scheme booklet, released yesterday, disclosed that Lonergan was paid $260,000 but payments to other advisers were not disclosed.

On the other side of the deal, Sydney-based TPG had “estimated transaction costs” of $9 million.

Its main advisers were Macquarie Capital, law firm Minter Ellison and KPMG, which was listed as TPG’s auditor and investigating accountant.

iiNet chairman Michael Smith has praised the contribution of Azure, saying the company and its adviser had a robust process in place to deal with the TPG proposal.

“Going into that, we have constantly kept a defence mandate in place,” Mr Smith told Business News in March.

“We have a valuation model on the business, which we have used for acquisitions and defence.

“Not long before this offer came in, we had revisited that with Azure and updated our own valuations.”

TPG's original scrip bid valued iiNet at $1.4 billion but this was lifted to $1.6 billion after M2 Group lobbed a competing bid.

The increased bid price was likely to have boosted Azure's fee.

The 326-page scheme booklet for Vocus Communications’ acquisition of Amcom, which was released in March, had more detailed disclosure on fees, at least on one side of the deal.

It disclosed that Amcom would pay $7.1 million in professional fees, with financial adviser Lazard pocketing $5.9 million.

Other advisers included Clayton Utz ($848,000) along with EY and PwC.

The Vocus fees were not disclosed, but the scheme booklet did state that Amcom’s $4 million break fee had been calculated to reimburse the likely legal and financial costs incurred by Vocus.

After the scheme booklet was released, the deal was thrown a curve ball when TPG Telecom acquired a 19.9 per cent blocking stake.

Amcom and its advisers managed to overcome that setback by marshalling a strong turnout by the company's other shareholders, who overwhelmingly backed the Vocus deal.

That resulted in Amcom's share price spiking 15 per cent higher today to $2.66.

The only other major M&A deal in Western Australia over the past year that was implemented through a scheme of arrangement was B2Gold’s acquisition of Papillon Resources.

The 604-page scheme booklet disclosed total fees of $6.1 million.

The main beneficiary was lead financial adviser Macquarie Capital, which was paid $2.5 million.

Deutsche Bank and Canada’s BMO Nesbitt Burns were paid $1 million each, Euroz Securities was paid $500,000 and law firm Hardy Bowen was paid $355,000.

 

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