NAO report reveals Freshfields' £1.8m bill for Royal Mail privatisation work
Freshfields Bruckhaus Deringer accrued legal fees of £1.8m for its role advising the Government on the controversial privatisation of the Royal Mail last year.
April 01, 2014 at 06:08 AM
2 minute read
Freshfields Bruckhaus Deringer accrued legal fees of £1.8m for its role advising the Government on the controversial privatisation of the Royal Mail last year.
Details of the firm's fees are revealed in a highly critical report on the privatisation published by the National Audit Office (NAO) earlier today (1 April).
Most of Freshfields' fees were passed on to the Royal Mail, with the exception of £211,000 paid to the firm for the sale of shares specific to the UK Armed Forces.
As detailed in the initial public offering (IPO) prospectus, Royal Mail agreed to reimburse the Government up to £5m of third party transaction and advisory fees, excluding any banking fees.
Freshfields advised the Department for Business Innovation and Skills on English and US law matters for the listing, with Tim Jones leading a team which included fellow corporate partner Martin Nelson-Jones.
The magic circle firm previously advised the Government on the restructuring of the Royal Mail's pensions liabilities ahead of the IPO.
Slaughters took the lead role for the Royal Mail on the IPO, with Davis Polk & Wardwell providing assistance on US law matters. Linklaters acted for the underwriters.
The breakdown of fees detailed in the report also highlights the gulf in fees between banks and legal advisers, with the underwriting bank syndicate – including coordinators Goldman Sachs and UBS, book runners Barclays and Merril Lynch and others – taking a base fee of 0.9 per cent, or £12.7m, for its role.
Business Secretary Vince Cable – who has been accused by the NAO of short-changing taxpayers in the sale – has not yet taken a decision on whether to award the banks a bonus incentive fee of around £4.2m.
The NAO report also criticises the advice given to the Department by the banking syndicate.
"On the advice of its advisers, [the Department] decided to sell the full 60 per cent of shares available for sale," the report says. "It could have retained 110 million more shares worth £363m at the offer price, while still achieving the policy objective of reducing the government's ownership to below 50 per cent."
No detail is provided on the cost of the legal advice to the Royal Mail or the underwriters.
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