Rothschild's $50m bonanza as BNFL nears sale of US arm

Katherine Griffiths
Sunday 11 December 2005 01:00

BNFL is to pay investment bank NM Rothschild a bumper fee of more than $50m (£28m) for handling the sale of its American nuclear business, Westinghouse.

The windfall is unusually high even by the lucrative standards of mergers and acquisitions fees. While investment banks usually earn around 1 per cent of the value of a deal, Rothschild is in line for a much higher cut.

Final bids are due in for Westinghouse a week tomorrow, with potential partners set to offer some $2.6bn (£1.5bn) for the Pittsburgh-based company which was bought by BNFL in 1999.

Rothschild's fee has yet to be finalised, but it is likely to be at least $50m and could well be in excess of that sum.

The prestigious firm, recently named the number one mergers and acquisitions bank in the UK and continental Europe by the publication Financial News, has been nicknamed the "shadow board" by some in BNFL's finance department due to its close relationship with the company's management.

Rothschild's payment has shocked BNFL insiders in the finance section who have recently learned of the proposals, because morale is already low at the company. Its owner, the British Government, intends to break up and sell off almost all of BNFL's businesses within the next five years, which could lead to job losses.

MPs also expressed anger at the size of Rothschild's fee because, as the company is publicly owned, taxpayers will ultimately foot the bill.

Lindsay Hoyle, a Labour member of the Trade and Industry Select Committee, said he was shocked at the size of the fee. "It's galling to see City names doing exceptionally well at the expense of the taxpayer." He also questioned the timing of selling a nuclear power station builder ahead of a review that could see new reactors commissioned in the UK.

There has been intense competition for Westinghouse, one of the world's largest providers of nuclear technology and one of the main contenders to win a multi-billion-dollar contract to build new reactors in China.

The main suitors for Westinghouse include General Electric and Shaw of the US, Japan's Toshiba, and Mitsubishi Heavy Industries and Doosan Heavy Industries, based in South Korea.

Both GE and Toshiba are expected to face open-ended reviews known as a "second-stage" referral in both Washington and Brussels, due to concerns over how much of the market they would control if they bought Westinghouse. GE and Westinghouse combined would have near-control of some markets, while Toshiba is raising concerns because it has a close business relationship with GE.

A spokesperson for BNFL commented: "We haven't agreed a fee and we haven't selected a final bidder yet."

The British Government has appointed the UK law firm Herbert Smith and New York-based Davis Polk & Wardwell to oversee Westinghouse's sale.

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