Todd Marin: Alibaba to pay Credit Suisse, Morgan Stanley record-breaking fees, say sources

NEW YORK, Sept 27 — Alibaba Group Holding Ltd awarded Credit Suisse Group AG and Morgan Stanley nearly half of the incentive fees given to the six banks that oversaw its record— breaking initial public offering, people with knowledge of the matter said.

All of the banks and brokerages that worked on the US$25 billion (RM 81.4 billion) IPO will collectively rake in about US$300 million for their efforts on the US$25 billion IPO, according to a September 22 filing from the company.

About US$50 million of those fees were doled out to the six key banks based on performance, with Credit Suisse and Morgan Stanley each getting 22.5 per cent of that slice, or a little more than US$11 million each, said the people, asking not to be identified discussing private information.

The reward reflects a practice that the Chinese e-commerce company imported from Hong Kong, where multiple banks share the work on an IPO and are awarded a performance fee at the end. In US deals, companies typically agree on the fee breakdown ahead of time, and most of the fees go to one or two firms listed on the prospectus in order of importance. Defying that custom, Alibaba listed most of its underwriters alphabetically.

With the bulk of the fees split among key banks, the additional US$50 million was was also viewed by management as a way to cover some of the costs undertaken by the banks that spent more time on the deal, one of the people said.

JPMorgan Chase & Co and Goldman Sachs Group Inc. earned about 18 per cent of the fees each, or US$9 million apiece, while Deutsche Bank AG was paid about 10 per cent and Citigroup Inc. received about 9 per cent, the people said.

Prospectus, roadshow

The Credit Suisse team was led by Imran Khan, head of Internet investment banking, and Vikram Malhotra, head of investment banking in Hong Kong, the people said. Morgan Stanley’s efforts were handled by Crawford Jamieson, the co-head of global capital markets for Asia Pacific, they said.

Those two firms drafted the prospectus, helped with the materials and preparation for the roadshow and are in control of the lockup agreements, said the people.

Credit Suisse has also garnered the number-one ranking in trading Alibaba shares, according to data compiled by Bloomberg.

JPMorgan Vice Chairman Jimmy Lee built a relationship with Alibaba’s co-founders Jack Ma and Joe Tsai in a matter of 15 months, the people said. Lee arranged meetings between Alibaba management and key investors, including Fidelity Investments and T. Rowe Price Group Inc., they said.

Deal size

Liz Myers, global head of ECM, and Michael Millman, co-head of ECM for the Americas, in addition to Todd Marin, vice chairman of investment banking in Asia-Pacific, and Noah Wintroub, head of Internet investment banking, rounded out the rest of the JPMorgan team. The firm was responsible for advising on Alibaba’s deal size as well as valuation, the people said.

Goldman Sachs is credited as serving as the stabilization agent, ensuring that the IPO ran smoothly during its debut. Mark Schwartz, the firm’s chairman of Asia Pacific, worked on the Alibaba IPO.

Mark Hantho, the global head of equity capital markets at Deutsche Bank, led the German firm’s efforts. He was joined by Joaquin Rodriguez Torres, head of technology, media and telecom investment banking in Asia, and Emmanuel DeSousa, global head of Internet and media investment banking.

Citigroup also helped determine Alibaba’s valuation, a person with knowledge of the matter said. Separately, the firm was appointed the depositary bank for Alibaba’s American depositary receipt programme.

Citi’s team included Tyler Dickson, global head of capital markets origination, Doug Baird, chairman of equity capital markets, Philip Drury, co-head of ECM for the Americas, and Kenneth Poon, head of Asia Pacific capital markets origination, the person said.

Representatives for Alibaba and the six banks declined to comment. — Bloomberg

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