Goldman Sachs Group Inc and Lehman Brothers Holdings Inc are getting less than half the minimum fees typically charged for arranging a US$3 billion Taiwanese banking merger, three people familiar with the terms of the deal said.
Goldman, the world's leading takeover adviser, accepted less than US$1 million for advising state-backed Chang Hwa Commercial Bank (彰化銀行) on its union with Taishin Financial Holding Co (台新金控), the people said, declining to be identified because the information is private.
Taishin Financial is paying Lehman Brothers Inc a similar sum, they said.
The nation's biggest financial merger in six years may help New York-based Goldman break into the top three takeover advisers in Asia outside Japan, from fourth now and sixth last year. Wall Street firms are competing for a smaller pool of fees in Taiwan this year, with one takeover of more than US$1 billion announced, from six last year, data compiled by Bloomberg shows.
"Fee competition in this market has been quite intense, so investment banks need to diversify and differentiate instead of relying on high-profile deals," said Peter Yu, managing director of Price-waterhouseCoopers LLP's financial advisory services in Taipei. "You can't expect to get a good fee with so much competition for mandates."
Citigroup Inc is the leading takeover adviser in Taiwan this year, followed by JPMorgan Chase & Co and Taipei-based Yuanta Core Pacific Securities Co (
Goldman, Lehman, Chang Hwa and Taishin Financial also declined to comment.
Goldman beat rivals including Morgan Stanley and UBS AG, who were initially seeking at least US$2 million for advising on the transaction, two people familiar with the matter said.
The fees Goldman and Lehman accepted may be the lowest for any multibillion-dollar merger in Taiwan, two of the people said.
Investment banks typically charge 1 percent of the transaction size on Taiwan deals of up to US$1 billion and demand a minimum US$2 million to US$4 million irrespective of deal size, said three bankers specializing in Taiwan mergers.
Advising on the merger may cost Goldman and Lehman less because it is prearranged.
Goldman didn't advise on any completed financial mergers in Taiwan between 2003 and last year, according to Bloomberg data. In 2002, the firm worked on the US$2.9 billion combination of International Commercial Bank of China (
That same year, Goldman also worked on state-owned Taipei Fubon Bank's (台北富邦銀行) US$2.4 billion sale to Fubon Financial Holding Co (富邦金控). The US firm earned more than US$5 million advising Taipei Fubon Bank, two people familiar with the deal said.
The government wants to sell Chang Hwa, in which it holds a 15.7 percent stake, to spur consolidation in the sector.
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