Rich harvest for banks in global agri deals

FINANCIAL advisers are set to earn $280-million (about R3.9-billion) in fees for advisory work on two blockbuster mergers in the agribusiness industry this week, according to initial estimates from Thomson Reuters and Freeman Consulting.

The huge paydays are the latest in a sector in which companies have rushed to consolidate as struggling commodity prices have hurt suppliers and farmers alike.

On Wednesday, Bayer unveiled a $66-billion takeover of US seed-maker Monsanto that will make the German drugs-to-chemicals conglomerate the biggest provider of crop sprays and genetically modified seeds by market share.

Earlier this week, Canada’s PotashCorp agreed to merge with US fertiliser rival Agrium to create a crop-nutrients group with a market capitalisation of almost $30-billion.

Banks advising Bayer and Monsanto — the largest cash takeover and biggest foreign acquisition of a US company to date — are expected to split $169.3-million in deal fees, the data providers said.

Monsanto’s financial advisers — Morgan Stanley and recently formed US advisory firm Ducera Partners — stand to share about $100-million of that amount.

Ducera, a boutique investment bank, was launched about a year ago by Michael Kramer, a restructuring banker who was fired by another advisory firm, Perella Weinberg Partners.

Kramer is involved in a bitter legal battle with his former employer, which has alleged that he breached his contract by trying to hire colleagues for his new venture while still working as partner at the firm. Perella Weinberg is suing him and could seek to recover fees he has earned since he left.

The remainder of the fee will go to Bayer’s advisers at Credit Suisse, Bank of America Merrill Lynch and Rothschild.

Bankers close to the deal said the fees paid by Bayer would be much higher after accounting for the large financing package involved in the deal.

The German company will pay for its US rival by raising $19-billion in equity through a rights issues and mandatory convertible bonds, and the remainder by issuing debt. Bayer is securing $57-billion in bridge financing from Bank of America, Credit Suisse, Goldman Sachs, HSBC and JPMorgan.

In the Potash deal with Agrium, structured as a merger of equals, banks are expected to share $110-million in deal fees.

Barclays was the lead adviser to Agrium, while Bank of America Merrill Lynch played the same role for Potash.

CIBC and RBC advised Agrium and Potash, respectively, on Canadian-specific matters.

One bank, Morgan Stanley, played the unusual role of joint adviser to the two fertiliser companies, which will net it payments from both. According to people involved in the negotiations, the Wall Street bank did not provide a valuation opinion. Instead, Richard Robinson, its senior natural resources banker, who has worked with both companies in the past, provided additional advice on other matters related to the transaction.

Advisers who follow deals closely warned that initial estimates often vary from the actual amounts banks receive on deals.

Other deals in the sector over the past year include Dow Chemical and Dupont’s agreement to combine in a $130-billion tie-up and ChemChina’s planned $44-billion acquisition of Swiss firm Syngenta. — © The Financial Times