Banks accept low fees to participate in state-owned companies' deals
Fierce competition for contracts of sale of government's equity stakes, either by stock offerings or direct deals, and pressure from the sellers for the lowest price are compressing the fees of financial advisers.
Since state-owned companies and the federal and state governments are responsible for a large part of the deals expected for this year, being out of them means losing positions in the financial rankings, staying distant from investors in hefty transactions and having little relation to the governments that have been generated several deals - that is the set of justifications that make them prefer not to profit or earn little in one or another transaction in relation to the market average.
One of the main recent examples is the offering of shares that the Brazilian Development Bank (BNDES) holds in Petrobras, which will take place in early February. Eight investment banks - Credit Suisse, Bank of America, Bradesco BBI, Morgan Stanley, Goldman Sachs, Citi, Banco do Brasil and XP Investimentos - will underwrite the R$23 billion offering.
According to four sources, they accepted shouldering the cost of the transaction, something uncommon in these contracts. And they will not do it because the fee is high - on the contrary, it is at 0.2%, sources say. "Even being a big offering, in these conditions it will not remunerate the banks," one executive says. "Breaking even is profit," another banker adds.
The sale of JBS shares that BNDES holds has fee of about 0.6% for the underwriting banks, sources say. The offering will be coordinated by Bradesco BBI, BTG Pactual, Itaú BBA, Bank of America and UBS. The fee for such offerings usually is at least 1% - but the percentage of the offering of JBS shares is close to those Caixa Econômica Federal paid in its divestments last year, when competition was already pushing fees down.
"It is shortsighted to consider only the fee. Other things count in this equation, such as being close to investors and selling shareholders and be part of iconic market transactions," says one banker who's participating in one offering.
It is the same situation in M&A mandates. Two recent contracts with banks made by Minas Gerais state utility Cemig for sale of stakes will give fees of 0.07% of the sale value, according to two sources.
In the last month, there was a fuss about the privatization process of Emgea, federal company that manages public assets. The process involves BNDES, which is holding a sort of bidding to...
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