Bankers To Gain If Regulators Clear Sat Merger
September 17, 2007 at 5:30 AM (PT)
Satellite radio may soon provide music to the ears of bankers at J.P. MORGAN CHASE and MORGAN STANLEY, reports THE WALL STREET JOURNAL. Before the credit markets imploded -- and leveraged buyouts turned from a major money-making proposition to a cost center -- the fees that the banks stood to reap from the proposed merger of SIRIUS and XM seemed positively paltry. After all, the banks arranging the LBO of terrestrial counterpart CLEAR CHANNEL COMMUNICATIONS stood to pull in $500 million or more. Furthermore, no one really expected the satellite deal to get regulatory approval.
The financial world in many ways now is turned on its head. The banks on deals like CLEAR CHANNEL are likely to see all those fees swamped by credit-market losses. That means the fees the two MORGANS could reap for advising on the satellite deal -- which aren't jeopardized by the whims of the credit markets -- don't look so bad anymore.
MORGAN STANLEY, SIRIUS's banker, has been promised a fee of $10 million if the merger is completed. It may also get an "incentive fee" of as much as $7.5 million. J.P. MORGAN, meanwhile, gets $12.5 million from XM, a big (unspecified) chunk of which is conditional on the merger closing. A payoff like that nowadays is enough to put a banker in orbit.