Skimming the froth off the top
The Distell/Heineken takeover circular reveals a nice fat payday for advisers RMB, ENS and Boston Consulting Group
Just when you thought the cost of mergers & acquisitions couldn’t get much steeper, Distell has unveiled a new service provider feeding at this particular corporate trough.
They are referred to as the “commercial advisers” in the recently released shareholder circular outlining Heineken’s proposed R40.1bn takeover, and their fee adds a hefty R23.1m to the already steep R105.4m of transaction expenses.
That additional 22%, taking the full price tag to R128.5m, is going to Boston Consulting Group (BCG) and “independent consultants”.
The biggest chunk of the full R128.5m bill goes to Rand Merchant Bank (RMB), which picks up an eye-watering R64.7m for its role as “financial adviser and transaction co-ordinator”. RMB takes another R300,000 as transaction sponsor, bringing its full take to a nice round R65m.
The new “commercial advisers” even pipped the legal advisers, with ENSafrica getting R21.4m for its contribution.
Given the copycat mentality behind megatransactions, it’s safe to assume we will be seeing much more of the type of “synergies report” produced by
BCG for Distell. But shareholders should not expect to see the actual report, as it is being kept under lock and key.
BDO, which authored the “independent expert report” — for a mere R1.9m — has apparently had sight of
BCG’s work. In its report, which is included as an appendix to the shareholder circular, BDO states that in arriving at its opinion — that the R180 a share offer is fair and reasonable — it relied on the “independent synergies report compiled by BCG as well as the report compiled by independent Distell consultants, the exCanback team”.
Frank Ford, Distell’s
group manager of investor relations, tells the FM the synergies report was conducted by an independent third-party consultant contracted by all three parties to the deal — Distell, Remgro and Heineken.
“The reason it was done by an independent third party was to ensure the parties do not breach any competition laws during the process and to ensure that there was an objective and aligned view of the potential synergies,” says Ford.
He confirms the report won’t be made available to shareholders. “Unfortunately, we are not at liberty to disclose the synergies report, given the competitively sensitive information it contains.”
No doubt such a report would also be useful in the event that a disgruntled shareholder votes against the transaction and launches an appraisal action.
And as for the split between BCG and the little-known “ex-Canback team”, no details can be provided, but an informed source confirms that the bulk of it ended up with BCG.
Of course, in a R40bn deal, lots of expenses can look incidental. Arguably, even the R1bn of employee share awards that will vest, if the deal is consummated, looks modest.
CEO Richard Rushton is in line for about R170m of that.
Unfortunately, we are not at liberty to disclose the synergies report, given the competitively sensitive information it contains