Goldman Sachs Group Inc. (GS:US), Bank of Montreal and other financial firms stand to claim as much as $150 million in investment-banking fees after Canada approved the foreign takeovers of Nexen Inc. (NXY:US) and Progress Energy Resources Corp. (PRQ)
Canadian Prime Minister Stephen Harper on Dec. 7 approved Cnooc Ltd’.s (883) $15.1 billion takeover of Nexen and Petroliam Nasional Bhd.’s C$5.2 billion ($5.3 billion) offer for Progress, clearing a key hurdle for closing the acquisitions of the Calgary-based companies.
Investment banks on both sides of Nexen’s takeover by Beijing-based Cnooc stand to make $80 million to $100 million in advisory fees, according to Lam Nguyen, a director at Freeman & Co., which specializes in mergers consulting in the financial industry. Freeman, based in New York, uses its own model to estimate bank fees based on deal size, industry and nature of the transaction.
Nexen estimates fees and expenses tied to the takeover to be about C$81.7 million, which includes fees to its financial advisers, New York-based Goldman Sachs and Royal Bank of Canada (RY), the country’s largest lender, according to regulatory filings.
Cnooc is being advised by Toronto-based Bank of Montreal (BMO) and Citigroup Inc. (C:US) of New York. Those fees haven’t been disclosed.
The Progress-Petronas transaction was estimated to generate $40 million to $50 million in combined advisory fees, Freeman’s Nguyen said in a Dec. 8 e-mail.
Progress said estimated fees and costs from its takeover are not expected to exceed C$22.7 million, according to regulatory filings. The amount includes “employee obligations,” fees to Bank of Montreal’s BMO Capital Markets as its financial adviser and Bank of Nova Scotia (BNS) for a fairness opinion, as well as legal fees and other costs, according to the July 20 filing.
Transaction costs for Petronas, which is being advised by Bank of America Corp.’s (BAC:US) Merrill Lynch unit, haven’t been disclosed.
Spokesmen for the financial firms either declined to comment or didn’t respond to messages left after regular business hours.
Canadian companies have been involved in $200 billion of announced takeovers this year, with Cnooc-Nexen the biggest and Petronas-Progress the fourth-largest, according to data compiled by Bloomberg. That has surpassed the $182.6 billion of announced deals for all of last year, and matching the amount for 2010.
Royal Bank’s RBC Capital Markets unit is the top arranger for takeovers involving Canadian companies so far this year, according to data compiled by Bloomberg. Goldman ranks second, followed by BMO Capital Markets.
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