Reed merger fees cost pounds 41m: Success payments made despite an agreed Elsevier deal
The money went to Warburg, Price Waterhouse and Freshfields, which advised Reed; and to Swiss Bank Corp, Coopers & Lybrand and Linklaters & Paines, which advised Elsevier.
Nigel Stapleton, finance director of Reed, defended the fees: 'It was a hell of a big merger. We had lawyers and accountants working not just in the UK and Netherlands, but in 27 other countries in which we do business.'
About pounds 16m went to Warburg and SBC, which were on success-related fees despite the agreed nature of the deal. The remaining pounds 25m was for the legal and accounting advice, which was priced at an hourly rate.
Mr Stapleton, while insisting Reed got value for money, added: 'I must say one has misgivings about the general concept of success fees.'
The merger, which created a global media business worth about pounds 7bn from 1 January, was almost derailed when sterling fell out of the exchange rate mechanism, forcing a renegotiation of the terms.
The pounds 41m figure, which was disclosed as an exceptional item, is in the pro-forma 1992 accounts for Reed Elsevier, announced yesterday.
Andrew Blackman, assistant editor of Acquisitions Monthly, commented: 'It sounds a lot of money, but it is less than the pounds 35m of fees paid by each side in the pounds 4.5bn merger of Beecham with SmithKline.'
Reed, which also published nine- month figures to 31 December, counted its share of the fees, pounds 22.4m, as an extraordinary item. The practice is shortly to be outlawed under new FRS3 accounting rules.
The treatment enabled Reed to report pre-tax profits of pounds 137.1m, up 10 per cent, and to beat by pounds 4m the 12- month forecast it made when announcing the merger. Under the new rules it would have been forced to report a decline in pre-tax profits.
Mr Stapleton, who sits on the Financial Reporting Review Panel, the accountancy watchdog, explained that the merger document, which contained the Reed profit forecast, came out before FRS3 was formally published.
Reed said the merger had started well and proposed a final dividend of 7.25p, making a nine-month total of 12.75p, up 6 per cent pro-rata.
- 2 Tom Cruise: Reporters banned from asking actor about Scientology
- 4 Dutch King Willem-Alexander declares the end of the welfare state
- 5 Giant Minion terrorises drivers in Ireland as 40ft inflatable blocks traffic on Dublin road
Edward Heath 'raped 12 year-old boy at Mayfair flat'
Sabrina Corgatelli: US hunting tourist posts picture of herself with dead giraffe after Cecil the lion outrage
'Gene drive': Scientists sound alarm over supercharged GM organisms which could spread in the wild and cause environmental disasters
Labour leadership race: Jeremy Corbyn could be the next Prime Minister, says Ken Clarke
Tom Cruise: Reporters banned from asking actor about Scientology
Is Britain really full up? Are migrants taking our jobs? Leading academic answers the most common anti-immigration claims
Calais Migrant Crisis: Deputy Mayor of Calais labels Cameron's use of 'swarm' as 'racist' and 'ignorant'
Chris Leslie: Jeremy Corbyn's anti-austerity agenda will harm the poor, says Labour shadow Chancellor
Landlords renting properties to illegal immigrants to face up to five years in prison
While we fixate on Calais, the Home Office is quietly deporting dozens of migrants on 'ghost flights'
Calais crisis: The seven claims made about the migrants - and the reality
iJobs Money & Business
£35000 - £37000 per annum + benefits: Ashdown Group: Contracts Executive - Cit...
£20000 - £25000 per annum + OTE £45K: SThree: SThree Group have been well esta...
£21000 per annum: Recruitment Genius: This is an exciting opportunity to join ...
Up to 70k DOE: Guru Careers: We are seeking an experienced Financial Director ...