Lead managers appointed for Mighty River Power IPO
Treasury has appointed three investment banks as joint lead managers for its first-off-the-block energy company float.
Goldman Sachs New Zealand, Macquarie Capital New Zealand and First New Zealand Capital / Credit Suisse Australia will project manager the sale of a minority shareholding in Mighty River Power.
The initial public offer (IPO) is the first of the proposed sell-downs of the government’s shareholding in four power companies. It will also sell 49% each of Meridian Energy, Genesis Power and Solid Energy and 24% of Air New Zealand.
State services Minister Tony Ryall said last year the government expects to pay $100 million in fees for the programme, which will be run over the next three to five years.
Treasury said the tender process that established the joint lead managers was highly competitive.
The chosen firms will be responsible for project management, consultancy, execution and advisory services for the IPO.
The Treasury has also appointed Bell Gully as its legal advisor.
Firms not successful in the tender for work on the Mighty River Power transaction will be able to compete for roles in subsequent transactions.
Three other firms firms - UBS New Zealand Forsyth Barr / Merrill Lynch Deutsche Bank / Craigs Investment Partners - are also on a wider panel, from which they potentially act as joing lead managers for future mixed ownership model transactions.
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Comments and questions13
Lovely - $100m in fees for the chaps. There must be a huge amount of work involved: at an average of $250k pa it amounts to 400 man years of selfless, unrelenting effort.
Even allowing for their junior staff who apparently earn even less than that some of the top guys are going to struggle to get $1m each out of this. We can only hope the NZ lifestyle is enough to keep their talents here.
Business has been tough for them lately but they'll earn every cent skilfully structuring and promoting these high-risk investments in a market where solid, blue chip, investment opportunities with strong cash flows and asset backing are everywhere. I am sure they'll manage if the price is right.
"Three other firms firms - UBS New Zealand Forsyth Barr / Merrill Lynch Deutsche Bank / Craigs Investment Partners - are also on a wider panel, from which they potentially act as joing lead managers for future mixed ownership model transactions. Sounds impressive. What does this mean?
And government is keen on saving money?
Surely only one investment bank was required and they sold down to other investment banks and institutions here and overseas.
Wouldn't that have reduced the cost?
I think it means they didn't get to the trough this time but their turn will come ...
Looks like a very heavy loading of advisers with attendant high costs
A great pity govt could not have been more frugal with our money
liberte
To defeat this sale which does not appear to have the widespread support of voters, customers of MRW can transfer to another power provider so with a much reduced customer base/profit the projected share price will plummet and hopefully the semi elected dictatorship that we refer to as government will learn a lesson before they find themselves consigned to the opposition benches.
Few things that need to be put into perspective:
1. $100m of fees is an estimate of total programme fees including investment banks, legal, marketing etc.
2. To put this figure in to perspective, the fees on the whole program represent approximately 1.5% of the total estimated sell down of $7b. Many people know that when selling property you spend closer to 4%.
3. Most bankers and legal professionals would off the record confirm that the government has been very tough on fees and driven costs significantly lower - this is a great project from a PR perspective for advisors so many many are doing it for below market rates and total project costs will likely be below $100m in the end.
4. There has been extensive free advice for the government from banks during the presentations to date, which has also lowered cost.
5. You need more than one bank one a deal of this size because of the tight schedule and the need to ensure sufficient demand comes from nz retail (have to admit that I'm surprised Craigs isn't involved).
Without either Craigs or Forsyth Barr involved, who together account for the majority of retail demand, the Govt will find it considerably more difficult to put the majority of these shares into the hands of 'mum & dad' investors as planned.
What's worse is we have 3 international banks running this process who are responsible who many 'mums & dads' may not put a lot of faith in; Goldman Sachs and the global financial crisis, Credit Suisse brought NZers Feltex, and Macquarie who really dont have any presence in NZ what so ever.
Selling these particular companies to "mum and dad" investors will not be hard. Noone will put money into finance companies and the businesses being sold with the exception of AirNZ have massive asset backing and strong cash flows which will mean high dividends.
$100 million in fees sounds a rort to me. Theres no risk in selling a power company, & it cant cost more than $2-3 million to take to the market.
Does it cost a real estate agent 4% of the property value to sell your house?
Not much of an analogy as "cost" isn't the basis on which commissions are calculated.
I take it you're close to this particular trough and as some sort of professional person would usually be insulted to be compared to a real estate agent.
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