Goldman misses bond fees as Abbott wins Solvay race

LONDON Mon Sep 28, 2009 1:45pm EDT

1 of 3. Christian Jourquin, chief executive officer of Belgian drugs, chemicals and plastics maker Solvay, holds a news conference in Brussels, September 28, 2009.

Credit: Reuters/Francois Lenoir

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LONDON (Reuters) - Solvay's 4.5 billion euro ($6.6 billion) drug unit sale to Abbott Laboratories has wrongfooted Wall Street heavyweights such as Goldman Sachs, who had stood to earn tens of millions of dollars from rival bidder Nycomed.

On Monday, Abbott (ABT.N) said it would buy the pharmaceutical arm of Solvay, its Belgian development partner, ending a months-long auction run by Citigroup (C.N), Morgan Stanley (MS.N) and Rothschild ROT.UL.

Abbott's only adviser, Barclays Plc (BARC.L) unit Barclays Capital, may earn $25-$28 million, according to estimates from M&A consultancy Freeman & Co. Solvay's (SOLB.BR) banks will split about $29-$32 million for their work.

The deal, struck over the weekend, gives Abbott full control of cholesterol treatments TriLipix and Tricor and a bigger footprint in emerging markets. [ID:nLS426471]

Plastics and chemicals producer Solvay said in April it was reviewing its pharmaceuticals business.

Interested parties have included an initially unreceptive Abbott, the private-equity-owned Nycomed NYCMD.UL, Takeda (4502.T) of Japan and Solvay's domestic rival UCB (UCB.BR), according to people familiar with the matter.

HIGH-YIELD

Nycomed, the Swiss drugmaker whose owners include Nordic Capital and Credit Suisse (CSGN.VX) unit DLJ Merchant Banking, for a long time appeared a frontrunner.

It submitted a bid of about 4-4.5 billion euros, including contingent payments, in early September, people familiar with the matter have said.

Nycomed devised a financing package compatible with its already high leverage that would have used bridge loans, quickly refinanced with a similar quantity of high-yield bonds in dollars and euros.

A deal with $2 billion of bridge loans and bonds would have yielded advisers up to $75 million, Freeman reckons: $25-$28 million for mergers and acquisitions (M&A) advice, $10-$15 million in loan fees and $24-$32 million for bond underwriting.

Goldman Sachs (GS.N) was joined at the last minute by Lazard (LAZ.N) as an M&A adviser to Nycomed, with JPMorgan (JPM.N), Bank of America Merrill Lynch (BAC.N), Credit Suisse and Deutsche Bank (DBKGn.DE) all working on Nycomed's financing, people familiar with the matter say.

In contrast, Abbott has a rock-solid AA credit rating from Standard & Poor's, and the U.S. drugmaker is funding the deal from available cash, meaning no lucrative follow-on fees for Barclays.

NOT INTERESTED

Barclays could have had no deal at all. In July Abbott signaled it was not keen on Solvay Pharmaceuticals, saying it was already strong enough in the class of drugs that includes the blockbuster Tricor.

"Like a lot of things, your interest in a given property or asset evolves over time. Early on we were not interested," Abbott Chief Executive Miles White told a conference call on Monday, adding that Solvay's "great strategic fit" became apparent only more recently.

Healthcare deals have proved an increasingly important source of income for banks as the credit crisis has crimped overall M&A.

Pfizer's $68 billion purchase of Wyeth is this year's biggest announced takeover, and fees from the healthcare sector have risen to 6.8 percent of completed M&A fees this year, Freeman says, the highest proportion since 2004.

Solvay's banks may also get more follow-on work advising on chemicals and plastics deals.

Solvay said it would reinvest some of the proceeds in "sizeable external growth" in these sectors, expanding geographically and looking to make itself less exposed to economic fluctuations.

Nycomed's advisers may not go entirely empty-handed; in the medium term it remains keen on an initial public offering that will value the company in the billions of euros.

($1=.6822 Euro)

(Reporting by Quentin Webb, editing by Will Waterman)

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