Goldman Sachs, Carl Icahn battle over fees
In a heavyweight battle, Goldman Sachs and activist hedge fund manager Carl Icahn are tussling over $18.5 million in fees.
Recall that CVR Energy, the oil company controlled by Carl Icahn, hired Goldman Sachs in March to advise it on how to deal with Icahn's tender offer. Last month, Icahn "won control of CVR with an 80 percent stake after a majority of shareholders accepted his $30 per share tender offer, which valued the Sugar Land, Texas-based company at about $2.6 billion," notes Reuters.
When Goldman Sachs bankers tried to get paid, however, CVR requested an invoice, which Goldman sent on May 3. But four days later, the company advised Goldman Sachs that "Icahn had instructed CVR not to pay the invoice," according to the complaint. Former Goldman Sachs banker Matt Levine, now a pundit, says Goldman Sachs may be on firm legal ground. And "Goldman's 52.5bps fee here doesn't seem way out of line," he writes.
He continues, in his latest DealBreaker column:
"But look at it from Icahn's perspective. CVR retained Goldman on February 15, and signed the current engagement letter on March 21. It did this in response to Icahn's January/February efforts to get it to sell itself, and Icahn announced his tender offer – at $30 per share plus a contingent cash payment right – on February 16. Goldman was presumably instrumental in negotiating some modifications, including a lengthening of the contingent cash payment period, but basically – Icahn ended up buying 80% of CVR's shares for $30 plus a contingent cash payment. So you can sympathize a little with Icahn here. The CVR board hired Goldman basically to fend off Icahn or, failing that, to maximize value for shareholders. Icahn was not fended off, though he was presumably pissed off by the attempt. And Goldman's value add for shareholders was, to a rough approximation, zero-ish: Icahn paid the same cash price as he offered before Goldman came along. So if shareholders got nothing, and Icahn got nothing but aggravation, why is he paying (80% of) $18mm for the privilege?"
I'm sure advisory fees are not always this easily garnered!