Goldman muscles past M&A rivals on Reynolds deal

By Philip Scipio and Christopher Spink

NEW YORK, Nov 4 (IFR) - The fight at the top of the M&A league table has intensified after Goldman Sachs (NYSE: GS-PB - news) muscled its way on to British American Tobacco's potential acquisition of Reynolds American (NYSE: RAI - news) .

Reynolds American formed an independent committee of directors to examine the deal and hired Goldman as the sole adviser to that committee. Advising a board of directors is a role usually taken by boutique investment banking firms.

But having been frozen out of the largest M&A deal of the year, the league table credit from Reynolds will instantly invigorate Goldman's standing in the announced M&A tables.

Last month BAT made a US$46.5bn offer to acquire the 57.8% stake in its US rival it does not already own. The company hired Centerview, Deutsche Bank (LSE: 0H7D.L - news) and UBS (LSE: 0QNR.L - news) as its advisers.

Reynolds American hired JP Morgan and Lazard as its advisers.

Rather than a pure sellside assignment, which Goldman excels at, the bank has a more challenging role in considering alternatives for Reynolds' shareholders. If it can find a superior alternative, the role as adviser to the committee will effectively morph into a leading role on the deal.

Most analysts expect the deal will close with the only real alternative being a higher price. Other players in the tobacco space are expected to consolidate further, but none are likely to make a run at Reynolds, according to one M&A adviser.

The stakes are high for Goldman.

Goldman tops the M&A adviser rankings this year, but its lead narrowed after nearest rival Morgan Stanley (Xetra: 885836 - news) was appointed by Time Warner (Xetra: AOL1.DE - news) alongside Allen & Co and Citigroup (NYSE: C - news) to defend the US$85bn approach for the cable company from telecoms group AT&T (Sao Paolo: ATTB34F.SA - news) , the biggest transaction of the year. Goldman has no role on that deal.

However, Goldman came roaring back, advising Qualcomm (Hanover: QCI.HA - news) on its acquisition of NXP.

With (Other OTC: WWTH - news) credit for advising Reynolds, worth US$57bn in league table credit, Goldman Sachs is securely back on top of the US table.

Goldman is credited with advising on 174 US deals valued at US$597bn. Morgan Stanley advised on 133 deals valued at US$515bn and JP Morgan advised on 181 deals valued at US$484bn, according to Thomson Reuters (Dusseldorf: TOC.DU - news) data.

Globally, Goldman is further ahead. It has advised on US$821bn of announced deals so far this year, giving it a US$121bn lead over Morgan Stanley. Third-placed JP Morgan advised on US$629bn.

Up to the end of October Goldman pulled in US$2.06bn in fees from M&A on 225 deals, according to Thomson Reuters. Morgan Stanley is number two, with US$1.6bn in fees on 226 deals, while JP Morgan had about US$1.58bn in fees on 228 deals. (Reporting by Philip Scipio)