Footnoted.org has once again done a stellar job of outlining the overlooked* — this time the nearly $100 million the financial advisors to Merck and Schering-Plough stand to pocket, should this deal close. Do go read it all, over there.
Now, come back here — I’ll readily agree that $100 million is huge — and the WSJ Blogs went on at length about how outsized these fees are, decrying ‘em as the third highest, in a decade. . . .
[I guess, conversely, (or perversely -- click at right!) all of these firms discussed below, lumped together, on the Schering-Plough/Merck deal, are only receiving about two-thirds of what CEO Hassan's golden-parachute is likely to billow outward, into -- if the merger yields over $25 per share for SGP common.]
However, as to the WSJ’s claims — in about only two minutes of Googling (is that officially a verb, Mr. Webster? I dunno), I was able to discern that even though Pfizer’s deal to buy Wyeth, announced less than two full months before SCH-Merck’s, is only one-third larger — those PFE-WYE financial advisors may pocket more than double what the SCH-Merck advisors are getting. Double — like $200 million, or more, per Bloomberg (January 24, 2009). Wow! To be fair, now, Wyeth’s advisors are largely Schering-Plough’s advisors, and vice-versa — so all of this dinero ends up in only three or four bankers’ pockets. Significant overlap, there. Cozy.
Here is a cleaned-up version of my comment at Footnoted.org:
. . . .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 (pages 83 and 91) 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 Pfizer has filed. However, 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. . . .”
Bloomberg estimates the fees-feast all-in, 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-levels, but only one-third larger, in transaction values).
It could be argued that PFE-WYE advisors were deeper in the “China-Syndrome” core of the markets’ melt-down, while they evaluated the financing, and acquring risks — and by comparison, SGP-MRK advisors faced somewhat less-troubled markets in March of 2009 — but that argument doesn’t cut a whole lot of ice. And fairness opinion fees/financial advisory signatures are are not to be up-sold, on a risk-adjusted basis (a la insurance policies’ premiums) — or at least that is what the SEC would like the investors to believe. Look, either the deal is fair from a financial point of view, or it is not. The fee charged for these outliers’ “fairness” begins to look like a bought-commodity, not a truly independent opinion of a professional, when one reaches these stratospheric numbers.
So 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 completely missed this PFE-WYE angle in its recital of outsized fees of the decade. . . .
Remember the entire offices of Schering-Plough’s (and Merck’s) financial advisors will make less than CEO Hassan, alone, on this deal. And this — for a guy whose company earned a “D” — from the Corporate Library, on governance, independence and pay practices. Yikes.
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* This whole topic was one, as irony would have it, that I (a self-confessed maven of minutiae), had just “overlooked“. Until this commenter alerted me to it, that is. Thanks!
