Wall Street Banks Eye a $600 Million Payday on CVS, Aetna Deal

(Bloomberg) -- Wall Street banks including Barclays, Goldman Sachs and Bank of America could share in a fee bonanza of as much as $600 million, after pledging one of the biggest financing checks ever to help fund CVS's $67.5 billion takeover of Aetna.

The companies are set to shell out fees for M&A advisory, financing and also arranging a bond sale next year to replace a $40 billion bridge loan from the three banks. Banks providing that loan could split up to $150 million, while underwriters on any debt sale could extract around $200 million combined, according to Freeman Consulting Services. The M&A advisers could net as much as $250 million in total, the firm estimated.

“This is very big for the banks with year-end coming up,” said Jeff Nassof, a director at Freeman. And a deal that's financed with debt is more lucrative, he said, because banks can earn fees on extending a bridge loan, then on arranging a bond sale and also in the subsequent trading of the bonds. That's on top of M&A advisory fees.

Bridge Loan

Barclays Plc, Goldman Sachs Group Inc. and Bank of America Corp. have committed to lend $49 billion for the transaction, with term loans augmenting bridge financing, a type of temporary funding.

The financing usurps the previous biggest bridge for a U.S. buyer in 2017 -- a $15.7 billion loan that Citigroup Inc. set up for medical devices provider Becton, Dickinson & Co. in April for its acquisition of C.R. Bard Inc., according to Freeman Consulting. 

Other notable loans funding acquisitions include Anheuser-Busch InBev NV's $75 billion of loans for its acquisition of SABMiller Plc in 2015 and the $61 billion loan Verizon Communications Inc. secured in 2013 for its buyout of the stake in Verizon Wireless it didn't own. JPMorgan Chase & Co. and Bank of America last year promised a $40 billion loan for AT&T Inc.'s planned takeover of Time Warner Inc., a deal that anti-trust lawyers at the U.S. Justice Department are looking to block.

Barclays and Goldman Sachs served as advisers for the acquisition for CVS Health Corp., as well as providing commitments for financing in addition to Bank of America. Centerview Partners also provided financial advice to the CVS directors. Lazard and Allen & Co. LLC advised Aetna Inc. and Evercore helped the insurer's directors.

The companies are also going to be shelling out fees to lawyers, with Shearman & Sterling, Dechert, McDermott Will & Emery advising CVS and Davis Polk & Wardwell assisting Aetna.

--With assistance from Lara Wieczezynski Claire Boston and Jacqueline Poh

To contact the reporter on this story: Nabila Ahmed in New York at nahmed54@bloomberg.net.

To contact the editors responsible for this story: Shannon D. Harrington at sharrington6@bloomberg.net, Dan Wilchins

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