Move over James Bond and make way for the undercover bankers of Morgan Stanley Dean Witter (MSDW). Practically undetected by key negotiators involved in Pacific Century CyberWorks’ (PCCW) takeover of Cable & Wireless HKT, it has over the last fortnight emerged that MSDW was in fact a “secret” adviser to PCCW.
“There was no reason to make our involvement public before now,” says Harry Van Dyke, head of Asian M&A at MSDW. Thomson Financial, which keeps abreast of advisory roles in the global M&A arena, says MSDW claimed involvement as an adviser to PCCW in April, but PCCW didn’t confirm this was the case until late September. Certainly, the role was too hush-hush to gain a mention in any of the documentation concerning the Cable & Wireless HKT takeover.
PCCW were once again uncontactable and so unable to explain why they failed to confirm MSDW’s involvement at an earlier stage. Thomson Financial says PCCW in the first quarter confirmed that UBS Warburg, Bank of China and Credit Suisse First Boston were advising it. Merrill Lynch and Greenhill were also confirmed by end-March as representatives of Cable & Wireless PLC, the majority shareholder of Cable & Wireless HKT. Jardine Fleming (now Chase JF) and ING Barings were also in the first quarter confirmed as advisers to Cable & Wireless HKT and the company’s minority shareholders respectively, and Salomon Smith Barney got recognition as the adviser to Pacific Century Regional Development, a major shareholder of PCCW.
MSDW wasn’t involved until April when it took on the role of advising Telstra regarding possible joint-ventures with, and investment in, PCCW, if the Cable & Wireless HKT takeover proved successful. Apparently, Telstra was so desperate to clinch the deal with PCCW – a deal it is in the process of renegotiating for the second time – it asked PCCW to let MSDW assume an advisory role in the Cable & Wireless HKT talks, to ensure the takeover progressed smoothly.
“We were in the background initially, but we were very active in putting the transaction to bed … We were considerably more involved than most others. We were one of the principal four or five advisers,” says one MSDW insider.
Undercover operation
The big question is why, having kept its role under wraps for so long, MSDW is now claiming involvement in the deal. Surely, the undercover bankers involved removed their dog-tags and name badges before any meetings they did attend, making it a deniable operation lest accusations regarding a conflict of interest cropped up.
The obvious answer is it wants a higher ranking in the league tables. “They will put a league table on a slide when they present to their management and say look we are number one in M&A,” says the rival corporate financier. The belated recognition of MSDW’s role has boosted the bank to second from 10th in Thomson Financial’s Asia (ex-Japan) mergers and acquisitions (M&A) league table.
Amusingly, Goldman Sachs, now lying 10th in the table after being leapfrogged by MSDW, has perhaps one of the better claims for recognition in the PCCW takeover. Goldman Sachs had advised Singapore Telecommunications on its unsuccessful bid proposal for Cable & Wireless HKT – the trigger for the PCCW deal. “Goldman Sachs deserves credit because they were advising SingTel and that got the whole thing going,” says the corporate financier.
If SingTel will grant a Telstra-style conflict of interest waiver, it might just be worth Goldman Sachs asking for accreditation as a behind-the-scenes PCCW adviser. PCCW has to be nice to investment banks for now – the company requires a minimum $6 billion refinancing for the $12 billion bridging loan taken out to buy Cable & Wireless HKT plus HK$7 billion ($898 million) financing for the construction of Hong Kong’s CyberPort. This, coupled with a two-thirds drop in its share price since the Cable & Wireless HKT takeover was announced, means PCCW Chairman Richard Li needs as many bankers as possible on side.
