The elite who kept their Marconi profit
By Carlos Grande in London
Published: September 10 2001 23:07 | Last Updated: September 10 2001 23:34
They are an elite club, which grows more elite by the day - the people who made money from Marconi.
The spectacular reversal in Marconi's fortunes has thrown a spotlight on the investment bankers, research analysts and other blue-chip advisers which have accompanied it on its three-year journey from FTSE grandee to market pariah.
The company's two US acquisitions in 1999 - of Fore Systems and Reltec, made for $4.5bn (£3.1bn) and $2.1bn in cash respectively - have been particularly questioned during Marconi's current cash problems.
Marconi was advised by Chris Brodie and Aidan Clegg at Warburg Dillon Read on Fore and by a team led by Mark Seligman and Ben Mingay at Credit Suisse First Boston (CSFB) on Reltec.
They were only part of a wide circle of bankers, including JP Morgan and a team led by Michael Tory at Morgan Stanley Dean Witter, who advised the company as it restructured to focus on the fast-moving telecoms sector.
The underwriters on the company's $1.8bn convertible bond offering in September 2000, for example, are a roll-call of global corporate financiers. They include MSDW, CSFB, JP Morgan, Merrill Lynch, Schroder Salomon Smith Barney, and UBS Warburg.
Unsurprisingly, none of those involved with either the bond offering or the various deals yesterday wanted to comment publicly. Most bankers are wary of rewriting the company's history and ignoring widespread approval for its strategy for most of the past two years.
One leading banker, close to the deals, said: "With the benefit of hindsight, people probably wouldn't have done the same deals. They wouldn't have wanted to stretch the company's balance sheet in the way they did. But nobody in April 1999 could have predicted the telecoms market was going to collapse in the way it did. The share price went up after every deal."
Analysts' notes on the company over the 18 months certainly read like so many hostages to fortune. A year ago Deutsche Bank entitled its note on the company, "Finest Hour", and said the shares were fairly valued at the prevailing price of £10.49.
Few would then have predicted that the shares, which touched £12.43 at their peak, were already on a downward spiral to last night's 33½p.
Some of the most consistently bullish coverage has come from UBS Warburg and CSFB, raising the inevitable questions about the objectivity of research at banks that also stand to earn lucrative fees.
CSFB, for instance, praised the company for integrating US acquisitions "without missing a beat". While other brokers were going sour on the stock, the CSFB buy notes continued.
In April CSFB analyst Douglas Smith rated the shares a buy at 310p, and in May said the company did "not expect any significant write-downs". CSFB finally put a hold on them last month after the first profits warning in July. At UBS Warburg, analyst Marcus Nash was similarly bullish throughout 2000, raising his price target for the company twice. By June 2001, when the shares had fallen to 268p, the bank still rated them a buy.
Mr Nash, who now covers the company for Morgan Stanley Dean Witter, said: "My personal feeling is that a broken watch is right twice a day and some of the brokers who look right now, may not be in a year or two's time." Although Goldman Sachs and Merrill Lynch were both more cautious, strong critics such as Williams de Broe and Collins Stewart were lone voices.
One analyst, who admitted "some link" between the research and dealmaking sides of the banks said: "It is fair criticism that when the stock kept going up and up and up, there was a lot of chasing that momentum. After July, all bets were off. You have to remember that even then senior people in the company seemed to have no idea what was really going on. Maybe we were too trusting of the answers they gave us."
COMMENTS: Expect the same about CSCO and ALA who that bought lots of start ups. |
