Bankers set for $30-$50 mln from TNK-BP - Freeman

Anjuli Davies

LONDON, Oct 24 (Reuters) - Bankers will likely pick up $30-$50 million for their work on Russian state-owned oil group Rosneft's $55 billion takeover of TNK-BP, according to Freeman Consulting.

That will be less than might have been expected from a deal of that size because banks likely discounted fees 40-60 percent given the nature of the transaction, with BP pressured to sell its stake to a government-controlled entity, Freeman said.

Data from Thomson Reuters and Freeman showed fees average about $35 million on $10 billion deals, smaller than the TNK-BP.

Fees also tend to be lower when governments are involved - the prestige of winning sovereign work has its own value, and there is always the hope of follow-up business in areas that grab fewer headlines.

On Tuesday, bankers said Rosneft was close to naming the co-ordinating banks on a $45 billion financing backing its deal to buy TNK-BP from British oil company BP and its partner AAR - a consortium of four Russian businessmen.

Rosneft's hand when negotiating fees will also have been helped by the lull in takeover activity globally will have caused plenty of jostling for business by banks looking to work on the sale of TNK-BP, Russia's third-largest oil company.

A recent example of fees set to be paid in a major deal came in documents published in May by Glencore and Xstrata related to their $33 billion merger. They said financial advisers were set to share a fee pot of $130 million, with a further $70 million slated for legal, accounting, public relations and other counsel.

Morgan Stanley, acting as principal financial advisor to BP is likely to earn the lion's share of a fee pot that will be shared with a string of other advisors.

For BP, UBS is also acting as a financial advisor and corporate broker, while Goldman Sachs, Lambert Energy Advisory and Renaissance Capital have each acted as financial advisors. Credit Suisse also did some work for BP.

On the other side, Bank of America Merrill Lynch and Citigroup have been acting as joint financial advisers to Rosneft.

It was not known who has been advising AAR. All of the advisers contacted by Reuters declined to comment.

There are two separate TNK-BP deals. One will see BP's half folded into Rosneft in exchange, ultimately, for $12.3 billion cash and 18.5 percent of Rosneft, raising its holding to 19.75 percent.

Meanwhile, AAR will get $28 billion for its half of TNK-BP.

The estimated fees do not include those expected to be paid to legal advisors, Linklaters for BP and Cleary Gottlieb Steen & Hamilton for Rosneft.


The value of mergers and acquisitions is down 16 percent globally this year to $1.7 trillion, according to Thomson Reuters/Freeman Consulting data.

That has translated into a slump in fees, down 22 percent and bad news for investment banks struggling to keep up with costs. In Europe, the Middle East and Africa, fees fell 35.4 percent to $6.8 billion.

Companies remain cautious on dealmaking, predicting a 12 percent rise in mergers and acquisitions in 2013, compared with a forecast of a 22 percent rise in deals a year ago, a Thomson Reuters and Freeman Consulting survey found in October.

``We have to get clarity on some of the macro issues such as the U.S. fiscal cliff and Greece, which would be positive for dealmaking,'' Wilhelm Schulz, head of M&A EMEA at Citi said.

``In terms of big, broad M&A, it is still pretty muted except for deals that have been in the drawer for a while.''

Banks advising British defence group BAE Systems and European aerospace company EADS on their proposed tie-up lost more than $100 million in shared fees when the deal was abandoned.