Prime Minister Stephen Harper has said Ottawa is taking into account security issues as it determines whether the $15.1-billion CNOOC-Nexen deal – which has been approved by shareholders – represents a net benefit to the country at large.CLARO CORTES IV/Reuters
Hundreds of millions of dollars in fees, not to mention bragging rights to the title of Canada's busiest merger adviser, hang in the balance after two big deals were thrown into limbo in the past week.
The banks with the most at stake are BMO Nesbitt Burns and RBC Dominion Securities, both perennial contenders for the coveted top slot in so-called league tables that rank investment banks by how much business they do. Both are currently in the top 3, but would lose ground to rivals if deals they are working on don't close.
That's painful, but the lost fees would hurt even more. For the bank-owned dealers like RBC and BMO, the timing is rough. It's getting on to bonus season with the Canadian bank fiscal year set to wrap up in a week, so the bankers will be scrambling to get every deal they can into the win column.
With BCE Inc.'s takeover of Astral Media Inc. and Petronas' buyout of Progress Energy Resources Corp. both unexpectedly blocked last week, BMO has the most fees at risk. The bank is advising Progress and BCE on their transactions, which have a combined value of about $9-billion. (Both still have a chance of being revived.)
It could get worse for BMO should the $15-billion Nexen Inc. takeover by CNOOC Ltd. run into government opposition, as many expect it will. BMO is also acting as an adviser to CNOOC. Using a ballpark M&A success fee of up to 0.5 per cent of the deal value, that puts the potential loss of fees to BMO from all three deals in the $100-million range.
RBC Dominion Securities too has to be a little nervous. It is advising Astral on its transaction, which BCE is hoping to save with a plea to the federal government, and working with Nexen on the sale to CNOOC.
What's more, RBC is also still waiting on a cheque for its work on the transaction that will see Viterra Inc. sold to a group led by Glencore International Plc for about $7.5-billion. That deal that is still awaiting one last approval from the Chinese government and is now said to be part of the horse-trading over CNOOC-Nexen. RBC advised the buyer.
Other investment banks awaiting payment from the Viterra deal include Canaccord Financial, for which it will be one of the biggest fees ever, and the securities arm of Canadian Imperial Bank of Commerce.